The DJI versus a 200 day Relative Strength reading ...

Many investors look at 100 and 200 day moving averages, but very few apply these same averages to important indicators.

The Relative Strength Indicator is one of the most commonly used indicators.  However, most investors use it for a short term perspective and only look at indicator settings of 30 and lower. 

So, what happens when you plot the 200 day Relative Strength Index against the DJI?

Obviously, you get a long term perspective on trending conditions.  In the chart below, we show the DJI vs. a 200 day Relative Strength. 

What do you see?

The 200 day Relative Strength Index is trending down and well below the important 50 level on the RSI.  While we may see additional short term movement going up on a 30 day RSI, the long term RSI is saying that this down trend has further to go.

If you look at the DJI price chart at the bottom of the graph, you will that we have an intersection of two important support levels.  One is at 10000 and the other is a few hundred points below that.  Bottom line, is that the trend of this indicator suggests that the DJI has a significant possibility of dropping down to the 10000 level in the coming weeks or months.

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