Dow Jones Technical Analysis

Last week, we saw a bit of a Christmas rally in the
Dow Jones, although some of the gains got erased in the final couple of days.
The market is all-in on the soft-landing trade with the Fed expected to cut
interest rates soon, the labour market coming into better balance and the
inflation rate on track to reach the 2% target by the end of the year. It’s
hard for the bears to fight the current positive sentiment, especially without
significant bearish catalysts, but such crowded trades are generally liable to
fast unwinding in case the prevailing narrative proves to be wrong, so the bulls
should be extra careful going forward.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones continues
to print new all-time highs amid positive risk sentiment and the support from
the recent Fed’s pivot. From a risk management perspective, the buyers would be
better off waiting for a pullback into the most recent swing low around the
37070 level where they will also find the red 21 moving average for confluence.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the
trendline has been defining the strong uptrend since last October. Last week
though, the price broke below the trendline, and
we can also notice that the latest leg higher diverged with
the MACD. This
is generally a sign of weakening momentum often followed by pullbacks or
reversals. This might be a confirmation that a deeper pullback into the 37070
level could be in the cards.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action and the divergence with the MACD. The sellers should
pile in around these levels with a defined risk above the high to target a drop
into the 37070 level. The buyers, on the other hand, will likely lean on the
37070 level with a defined risk below it to position for a rally into another
all-time high.

Upcoming Events

This week is full of key economic data which will
culminate with the NFP report on Friday. We begin tomorrow with the ISM
Manufacturing PMI and Job Openings and given the recent trends there could be
room for disappointment. Later in the day, we will get the release of the FOMC
Minutes, but it’s not expected to be market-moving given that it’s three weeks
old data. On Thursday, we will have another slate of US labour market data with
the release of the US ADP and Jobless Claims figures. Finally, on Friday, we conclude
the week with the NFP report and the ISM Services PMI.

This article was written by FL Contributors at

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