US Dow Jones: A star performer amid the current US AI stocks sell-off

• Dow Jones outperforms as major US AI stocks tumble — the Nasdaq 100 and S&P 500 dropped 2.1% and 1.2%, while the Dow fell a milder 0.5%.
• Financials show resilience with JPMorgan, Bank of America, Goldman Sachs, and Morgan Stanley holding steady or posting modest gains, signalling no systemic stress.
• Technical setup favours a rebound, with the Dow Jones holding above its 20-day moving average and bullish signals emerging from the RSI momentum indicator.

The technology-heavy Nasdaq 100 and S&P 500 tumbled on Tuesday, 4 November, by 2.1% and 1.2% respectively, weighed down by an 8% plunge in Artificial Intelligence (AI) favourite Palantir Technologies, despite its Q3 earnings beat.

The selloff was driven by valuation concerns, as Palantir’s price-to-sales ratio surged to 85 as of Friday, 31 October, the highest in the S&P 500. Adding to bearish sentiment, hedge fund manager Michael Burry revealed short positions against Palantir and Nvidia in his latest 13F filing.

Notably, the US financial sector remained largely insulated from the tech rout, signaling no signs of systemic contagion. Major lenders JPMorgan Chase and Bank of America ended flat, while investment banking leaders Goldman Sachs and Morgan Stanley posted modest gains of 0.7% and 0.2%, respectively. This resilience helped the Dow Jones Industrial Average outperform, dipping by a milder 0.5% on the same day.

Let’s now examine the technical factors, short-term (1 to 3 days) trajectory, key elements, and key levels to watch on the US Wall Street CFD Index (a proxy of the Dow Jones Industrial E-mini futures).

The US S&P 500 Financials sector exchange-traded fund (XLF)’s six months of underperformance against the S&P 500 exchange-traded fund (SPY) has started to lose momentum, as shown by its relative strength chart, XLF/SPY (see Fig. 1).

The ratio of XLF/SPY has started to shape a “higher low”. In contrast, the current top outperformer, the US S&P 500 Technology sector exchange-traded fund (XLK), which consists of those mega-cap technology stocks such as Nvidia, Microsoft, and Apple, has started to lose steam as indicated by the “lower high” of its relative strength chart, XLK/SPY.

Given that the Financials sector forms the biggest weightage of around 30% in the Dow Jones Industrial Average, a reversal of fortunes in the Financials (a further slowdown of underperformance against the S&P 500) may support a positive feedback loop back into the Dow Jones.

Bullish bias on the US Wall Street 30 CFD Index with 46,740 as the key medium-term pivotal support. A clearance of 47,255 increases the odds of a short-term bullish reversal towards the next intermediate resistances at 47,460 and 47,750 in the first step (see Fig. 2).

• The price action of the US Wall Street 30 CFD Index has formed a daily bullish “Hammer” candlestick pattern right above the upward-sloping 20-day moving average on Tuesday, 4 November, after a prior 5-day corrective decline from its current all-time high of 48,088 on 29 October.
• The hourly RSI momentum indicator has staged a breakout above its descending resistance, which suggests a potential revival of short-term bullish momentum.

A break below the 46,740 key support invalidates the bullish reversal scenario on the US Wall Street 30 CFD Index for a deeper corrective decline towards 46,350 and even 45,485 next.