Dow Jones Technical Analysis

Yesterday,
the Dow Jones finished the day mostly flat as a big drop in the price index in
the ISM Services PMI turned the sentiment around and quelled some
inflation fears. In fact, the market stayed under pressure since the hot ISM Manufacturing PMI on Monday as the increase in the price index
renewed fears of a reacceleration in inflation. For now, the market might take
a sigh of relief, but all eyes then will turn on the US CPI report next
Wednesday.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones has
been trading inside a rising channel and continued to diverge with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we got the pullback into the lower bound of the
channel where we can also find the red 21 moving average for confluence. This is
where we can expect the buyers to step in with a defined risk below the bottom trendline to
position for a rally into the upper bound of the channel. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into the 38464 level.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we
also have the 61.8% Fibonacci
retracement level for extra confluence around the
lower bound of the channel. This makes it a very strong support zone and a
break below it should trigger a selloff as the buyers will likely fold and the
sellers will pile in more aggressively.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action with a possible double bottom right
on the support zone. If the price were to break above the 39300 level, the
pattern would be confirmed, and the buyers will likely increase the bullish
bets into new highs. The sellers, on the other hand, might want to lean on the
39300 level with a defined risk above it to position for a break below the
lower bound of the channel with a better risk to reward setup.

Upcoming Events

Today we will see the latest US Jobless Claims
figures, while tomorrow we conclude the week with the US NFP report.

This article was written by FL Contributors at www.forexlive.com.