The US 30 stock index faced strong selling this week that forced the price to abandon the 10-month old channel and drop to a four-month low of 26,483, where the 38.2% Fibonacci of the 21,596-29,582 upleg happens to be.
A rebound or some stabilization near recent lows cannot be ruled out as the RSI and the Stochastics flag oversold conditions. Yet, with the price having breached the channel significantly to the downside and the 20-day simple moving average (SMA) set to cross below the 50-day SMA, there is little optimism that the negative direction will change in the short-term.
Below the 38.2% Fibonacci and the 26,483 low, the door would open for the 50% Fibonacci of 25,597.
In the event of an upside reversal, the bulls may attempt to break above the 200-day SMA and the bottom of the channel. Failure to do so, would shift attention back to the downside whereas a successful close above that barrier could initially test the 23.6% Fibonacci of 27,700 and then the 28,200 resistance level.
Meanwhile in the medium-term picture, the index has violated its previous lows, bringing its upward pattern into question. A rally above 28,900 could eliminate any concerns of a down-trending market.
Summarizing, the US 30 index could pause its recent free-fall in the short-term, though increasing negative trend signals warn that the downward direction may stay in place.