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Can Goldman Sachs, Microsoft and Others Save the Dow?

The Dow Jones Industrial Average has been struggling lately, as have most U.S. stock indices. Can the index find its footing and rally into year-end?

The Dow Jones Industrial Average hasn’t done too bad lately, with the index about flat over the past month.

Year-to-date, it’s done about as well as the other major indices, up roughly 13% just like the Russell 2000 and the Nasdaq. The S&P 500 has outperformed all of them, up 16.5% in 2021.

When I look at the technicals though, there are clear issues standing out on the Dow Jones Industrial Average.

As we enter mid-October, it’s clear that we may be in a make-or-break situation for the index.

JPMorgan  (JPM) - Get Free Report will kick off earnings in a few days. Goldman Sachs  (GS) - Get Free Report will follow shortly after on Oct. 15. The banks make up the No. 15 and No. 2 weightings in the Dow, respectively.

For what it’s worth, Microsoft  (MSFT) - Get Free Report sits up at No. 4, while Apple  (AAPL) - Get Free Report is the 20th largest weighting in the 30-stock index.

Can earnings from these handful of stocks save the Dow or is more selling pressure underway?

Trading the Dow Jones Industrial Average

Daily chart of the Dow Jones ETF.

Daily chart of the Dow Jones ETF.

On Sept. 2, the Dow put in a lower high, failing to take out the high from Aug. 16. That began a slippery slope for a larger correction, which ultimately sent the SPDR Dow Jones Industrial ETF  (DIA) - Get Free Report down to the $336 area.

The Dow put together a solid rally over the next six days. However, that rally came to an end as it pushed up to $350 and the 50-day moving average.

On the ensuing dip, the $338 to $340 area held strong as buyers continued to accumulate the Dow in this area.

However, the resulting rally is again being rejected by the 50-day moving average. Further, we’re getting another higher low in the index.

These are not the developments that bulls want to see, even if it isn't the end of the world.

From here, bulls must keep an eye on the 10-day and 21-day moving averages, as well as the gap-fill level at $344.30. A break below all of these levels could put a retest of this month’s low on the table.

On the upside, keep an eye on $346.77. Back above this level puts the Dow ETF back above the Thursday and Friday low, opening the door to the 50-day moving average.

If this level is again resistance, the Dow remains vulnerable. If it can close above it, $350-plus could be in play.

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