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.
