Dow Jones Average is now red for the year. Here's where it could go next

Published Thu, May 4 20234:16 PM EDT

While the Dow Jones Industrial Average 's year-to-date move into the red on Thursday may signal more choppy, range-bound trading ahead, technical analysts say they don't think it's an omen for new multi-year lows. The Dow turned negative for the year as another wave of banking concerns rattled the broader market, though the index has traded within a 7.5% range over the course of 2023 so far. The index hit a year-to-date low on March 13, closing at 31,819, which is about 4% lower than where the index finished 2022. Its highest 2023 close, at about 34,303 on Jan. 13, represented a 3.5% advance from the start of the year. So far this year, markets have traded in a tight range as economic uncertainties linger, with commentary from Federal Reserve Chair Jerome Powell on Wednesday doing little to ease concerns over when a recession will occur, or when the central bank might deliver lower interest rates. Chart experts say the closely followed blue-chip Dow Jones average could test long-term moving averages. Notwithstanding any short-term decline, many analysts don't see the Dow breaking below multi-year lows. Thursday's close of 33,127.74 points, for example, is still 42% higher than the average's lowest close during the pandemic — 19,173.98 on March 15, 2020. .DJI YTD mountain The Dow Failing to hold above its 200-day moving average of 32,707 could mean more downside ahead for the 30-stock average, said JC O'Hara, chief technical strategist at Roth MKM. And, there's a "good chance" the index breaks below that given how Dow companies reporting earnings so far have fared, he said. The next key downside level to watch would be the March low, near 31,429. "On average the stocks have an aggregated [earnings] surprise of nearly +10%, but the stocks are not being rewarded," O'Hara said of earnings season for Dow stocks thus far. "If stocks can't move higher when you receive positive news, it tells me the market is in weak hands." Stephen Suttmeier, chief equity technical strategist at Bank of America Global Research, said he's watching the range of 32,570 to 32,750, which he follows in part because it reflects the 40-week moving average. After that, he'd also look to the March bottom, or to the even-lower 200-week moving average of 30,950. If those fail, Suttmeier said it becomes harder to find ranges to point to besides the lows seen in 2022. But he did say investors can get smoke signals from watching the S & P 500 's financial sector, as further pain may be ahead if financials can't rebound or at least steady as regional banks suffer. The S & P 500 financials are down 8% this year, while the SPDR S & P Regional Banking ETF (KRE) has plummeted almost 39%. "If that doesn't hold, it's hard to make a case that the Dow is going to hold up that support," he said of the financial sector. 'Stuck between a bull and a bear' The Dow's relative underperformance this year is an exception to the general rule of 2023's market, where bigger cap names have been performing better, said Jonathan Krinsky, chief market technician at BTIG. That's because the Dow's two biggest stocks, UnitedHealth and Goldman Sachs , are both down this year (8% and 6%, respectively). The Dow's decline can also be tied, in part, to a sort of leveling out after outperforming in the final months of 2022, he said. UNH GS YTD mountain UnitedHealth & Goldman Sachs One of the main contributors to the Dow's choppy trading range is weak breadth and market participation, and uncertainty surrounding the economy, said Dan Wantrobski, a technical strategist at Janney Montgomery Scott. Technology and homebuilding stocks have dominated as main market leaders and, without broader participation, investors should brace for more range bound-trading, he said. "In healthy bull markets, you want the engine firing on all cylinders, and what that means is that most sectors and stocks are participating in the upside," Wantrobski said. Bank of America's Suttmeier said investors have mainly rotated between sectors in current market, hedging bets on technology in hopes of a change in interest rate policy. Still, it marks a turn from 2022, when the Dow was able to eke out the smallest loss of the three major indexes. And the Dow had potentially the most bullish index chart in the U.S., heading into the year, Suttmeier said, followed by the S & P 500 and the tech-heavy Nasdaq Composite . Now, the Dow is the only one of the three in the red on the year as investors favor growth stocks over value. When it comes to the Dow's Thursday turn into the red, analysts say they aren't surprised given the trading performance so far this year. "It's consistent with the range-bound action of the stock market for most of the year," Oppenheimer's Ari Wald said of Thursday's market moves. "We're stuck between a bull and a bear." — CNBC's Michael Bloom contributed to this report