On the daily chart below for the Dow Jones, we can see that the price bounces from a key support level as the US GDP showed a better than expected consumer under the hood and Jobless Claims beat expectations.
The price has rallied towards the next key resistance at 34477 but yesterday’s better than expected ISM Manufacturing PMI may be a bad omen for the buyers. The inflation and employment sub-indexes returned back into expansion and if we couple that with good data since last week, it makes the Fed’s job of pausing rate hikes harder.
On the 4 hour chart below, we can see the bounce from the key support and the 38.2% Fibonacci retracement level. This latest rally is again diverging with the MACD as it approaches the key resistance, which may be another bad sign for the buyers. Generally, the divergence is a sign of weakening momentum, often followed by a pullback or reversal.
This week has lots of top tier economic events like the ISM PMI reports, the FOMC and the NFP. If we see strength in labour market data with weakness in inflation data, then we are likely to see the buyers in control, vice versa if we see strength on both sides, then the market is likely to fall as the Fed will be likely to keep hiking.
In the 1 hour chart below, we can see that the pullback that started going into yesterday’s market close is finding support at the 38.2% Fibonacci retracement level. From a risk management perspective, the 61.8% level with the previous swing high support is a stronger zone where the buyers could pile in. For the sellers that would be a good barometer for the sentiment, and they are likely to jump in if the price breaks below it.
