Chart 1

Dow Jones Industrial Average

Stated differently, a death cross has been a good indicator to tell us that investors should be out of the market.

Unfortunately, since the financial crisis and intervention by the Federal Reserve, death crosses and their inverse “golden crosses” have been less effective in predicting major trends. There have been several occasions when crosses are immediately reversed leaving investors with losses.

But even with its spotty track record over the past few years, investors should still pay attention because the signal is starting to propagate to other major indexes. The New York Stock Exchange composite, representing the average stock, also scored a death cross this week.

And although the Nasdaq, which we often call “tech heavy,” is still a long way from the signal, the Nasdaq-100 Technology Index does indeed sport a death cross. I called technology leadership an illusion here last month (see Getting Technical, “This Market Is Not Pretty; Tech Strength an ‘Illusion,’” July 22).

The Dow is also closing in on a Dow Theory sell signal. Although there is much more to the theory, the part everyone watches is the confirmation of trend changes by the Dow Industrials and Transports. When each index makes a low below a prior significant low, then the theory says the major trend has changed from up to down.

It is no secret that the transports fell below their important lows of December-February (see Chart 2). And even with the summer rebound, they were stopped at the resistance set by those lows. So now all eyes turn to the industrials and their Feb. 2 low of 17,037, which I also outlined in July (see Getting Technical, “S&P 500 Suffers Technical Breakdown; Cash Is King,” July 8). That is now less than 100 points below Wednesday’s morning low of 17,125.

Chart 2

Dow Jones Transportation Average

Of course, since writing that column the market rebounded on news of a Greek bailout and hopes for recovery. This week’s trading has erased most, if not all of that gain, depending on the index followed. Cash was and still is king for investors as this market continues its transition.

As the TV pitchman would say, but wait, there is more! While the small- capitalization Russell 2000 index has not had a death cross, it has plunged down through its 200-day average. And as of Wednesday, the Standard & Poor’s 500 itself flirted with its 200-day average, too.

In sectors, using Select Sector SPDR exchange-traded funds, both health care and consumer discretionary) made significant moves below their averages Wednesday. They now join energy ), industrials and basic materials in this spreading bearish condition.

The technical elephant in the room remains the 2015 trading range in the benchmark S&P 500. While the index dropped below its average as mentioned earlier, it still trades within the confines of a giant trading range in place since February (see Chart 3). The question is whether it matters at this point, and I think it does. Support at 2040-2046 still looks very important on the charts, and that could be the point of maximum pain where the staunchest of bulls finally throw in the towel. Until then, there is still hope.

Chart 3

Standard & Poor’s 500

There is very little propping up this market right now; even though it closed well up from its worst levels of the day Wednesday, a good deal of technical damage has been done. It may take another small rebound from here to set up a major fall or it may not. In either case, the topping process continues.