Recent weakness in the equity market emphasizes the need to monitor charts closely for risk management. During corrections, we monitor key support levels and counter-trend indicators to help identify when the risk-reward profile of the market becomes more favorable.

As of Friday’s close, the Dow Jones Industrial Average was off its all-time high by nearly 8% and sitting just above its 200-day moving average, which is support near 46,500. Short-term oversold conditions are in place for the first time since November, and a new signal from the DeMARK Indicators calls for a rebound this week. The 50-day moving average is initial resistance near 49,000, though a bounce of that magnitude appears unlikely before the correction regains its hold.

The correction in the Dow is associated with a meaningful loss of intermediate-term momentum, the likes of which we have not seen since the first quarter of 2025. The recent bearish crossover in the weekly moving average convergence/divergence (MACD) suggests any bounce is likely to be brief and give way to a breakdown below the 200-day moving average, with former highs near 45,000 as secondary support, bolstered by the weekly cloud model. We often see corrections play out in an A-B-C pattern, meaning another leg lower is likely after a rebound, and a significant corrective low is probably at least a few weeks away.

The Dow has pulled back in relative terms as well, having given back its year-to-date outperformance versus the S&P 500. However, the ratio of the Dow to the S&P 500 is now short-term oversold within what appears to be a rounded base, suggesting the Dow should decline less than the S&P 500 (i.e., outperform) through the remainder of the correction.