Dow Jones Falls 3,500 Points For Month; Blue Chip Falls

The Dow Jones industrial average is bouncing off early-morning lows, but market bears still dominate the action in stocks today. Procter & Gamble (PG), a member of the 30-stock Dow industrials, cut through its 50-day moving average to prompt a key sell signal.

The Dow Jones industrial average made a session low of 21,993, down as much as 3,545 points (or 13.9%) for the month of December. At around noon in New York, the Dow fell more than 1.9%. Wall Street closes at 1 p.m. ET today ahead of the Christmas holiday.

The Nasdaq composite briefly rebounded into positive ground before cooling off again. The tech-weighted index slumped 1.1%, doing better than other indexes as bargain hunters propped up a smidgen of internet content, retail, software and biotech stocks. At least five IBD industry groups in the vast retail sector, including apparel and shoes, department stores and specialty retailing, rallied 1% or more.

The S&P 500 sank 1.7% as shares of automaker, utility, oil and gas, solar, and food and beverage firms paced the downside. Small caps fared better. The S&P SmallCap 600 cut its loss to around 0.6%.

The Dow utility average slid more than 4%, while the Dow Jones transportation average fell 1.8%. Such steep declines by these sector-based indexes indicate greater concern over the economy in the next six to 12 months.

On a monthly basis, no month since March 2009 comes even close to the damage seen in the Dow Jones industrials this month. The swing from low to high during the month of August 2011 reached nearly 1,700 points. The Dow closed 530 points lower, or 4.4%, that month. In the month of October that same year, the 30-stock blue chip index swung 1,880 points from low to high before finishing that month with a 9.5% gain.

Dow Jones Component Hits A Key Sell Signal

Procter & Gamble, the shampoo, pet food and personal care products titan, fell more than 4% to 87.31. While volume was running mildly below average levels, the Dow Jones Industrial component plunged below its rising 50-day moving average. That negative action, coming after a recent breakout, issues a key defensive sell signal.

P&G broke out of a gigantic saucer with handle on Oct. 19, rising past an 86.38 proper buy point in heavy volume following Q3 results. After that breakout, the stock advanced 12%. But now P&G is threatening to complete a round trip of that solid short-term gain.

Cincinnati-based Procter & Gamble currently shows a strong 94 Relative Strength Rating on a scale of 1 to 99, according to IBD Stock Checkup. But keep in mind that the RS Rating covers 12 months’ worth of price performance vs. all other companies in the IBD database. In other words, don’t use the RS Rating as a sell indicator. Price-and-volume action on a chart is the way to go.

Among the 30 stocks in the Dow Jones industrials, the average RS Rating is currently 67. This means the average Dow Jones industrial stock is beating 67% of all publicly traded companies on a 12-month price-performance basis.

Besides P&G, five other components hold a 90 RS Rating or higher, including Merck (MRK) (RS Rating of 96), Pfizer (PFE) (93), and former Leaderboard members Verizon Communications (VZ) (93) and McDonald’s (MCD) (92).

In the Nasdaq Composite

Meanwhile, Alphabet (GOOGL) is trying to halt a three-day slide. The search engine innovator at one point rose more than 2% before easing again. The Nasdaq-listed company is trading more than 23% below a 52-week high of 1,291.

Planet Fitness (PLNT), recently featured in numerous IBD stories including IBD Stock Spotlight, bounced vigorously off session lows and cut its loss to around 1.5%. At 49.97, the budget-gym pioneer still trades below the 50-day moving average. Yet Planet Fitness continues to outperform the major indexes by trading 14% below its 52-week high.

In contrast, the Nasdaq, hitting bear market territory last week, is more than 22% below its all-time peak of 8133.

Please follow Chung on Twitter at @IBD_DChung for more on financial markets.

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