On Oct. 19, 1987, toward the end of my rookie year in the investment business, the Dow Jones Industrial Average ($DOWI) dropped more than 500 points in a single day. Now, that barely gets noticed.
Because as Wall Streeters and POTUS are fond to say, the Dow just hit 50,000. So a 500-point move now is only 1%. In 1987, that one-day plunge was more than 22%. Yes, in a single trading day.
Thursday’s 1,000-point dive in the 30-stock Dow Industrials was noteworthy, if not an epic, historical event as it was decades ago. But it continues a disturbing trend, one that is showing up in my chart analysis. The bottom line is this: The Dow, and the broader market with it, are nearing a technical “point of no return” — where the technical damage is likely too great to reasonably expect a recovery any time soon.
That said, my entire process is based on not being binary. To me, the market is never black or white. It is always a shade of gray. But currently, it’s a very dark shade of gray. Let’s look at the aforementioned charts and provide some context.
This daily view is now broken. The PPO has dipped into negative territory, and the 50-day moving average has joined the 20-day in trending negative. These are never guarantees, but it is more like this market horse’s odds just went from even money to longshot.
We’ve seen time after time that the weekly chart bails out the daily. That translates to a dip and not a substantive decline. And it brings in the dip buyers. This has been the case since the fourth quarter of 2022. But now we are a weekly close or two (down) from repeating the pattern that led to 2025’s rapid meltdown. Around this time of year, in fact.
Markets have a memory. We technicians aim to track that, and make decisions from it. In this case, the Dow around 47,000 is about 10,000 points above where it bottomed just 11 months ago, on April 8, 2025. Does it get there? I think the door just opened for that possibility.
The most immediate catalyst for this decline is a dramatic escalation of geopolitical conflict in the Middle East. Direct military exchanges between Israel, the United States, and Iran have triggered a massive spike in energy prices, with benchmark crude oil topping $90 a barrel. This spike has reignited fears of a second wave of inflation, just as the market believed the Federal Reserve was nearing a decisive rate-cutting cycle.
Investors are now worried that higher gasoline and shipping costs will filter through the entire economy, forcing central banks to keep interest rates at restrictive levels for much longer than anticipated. This higher-for-longer scenario is particularly toxic for the industrial and consumer discretionary sectors that hold significant weight in the Dow.
Beyond the energy shock, the narrative is being weighed down by a widening economic divide. While upper-income households have benefited from the wealth effect of high equity prices, lower-income consumers are increasingly exhibiting signs of exhaustion. Major retailers and consumer-facing companies have recently noted a material drop in traffic as budget-conscious households prioritize essentials over discretionary purchases. This K-shaped recovery is beginning to show cracks even in the stronger segments, as persistent inflationary pressure on rent, insurance, and services continues to erode disposable income. Furthermore, the labor market is showing the first real signs of cooling.
So, what’s a poor investor to do? I am asked this all the time. And while there are now a wide range of exchange-traded funds (ETFs) alongside traditional cash investments to cushion the potential fall, the simplest one is to think in reverse.
Specifically, if the goal is to profit from the Dow’s continued decline, Short Dow30 -1X ETF (DOG) is one of many single inverse ETFs whose purpose is to provide a security that goes up as much as an index (the Dow, here) goes down. And, it falls when the Dow rises.
Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob’s written research, check out ETFYourself.com.
On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com