On the daily chart below, we can see that the Dow Jones weakened as traders “sold the fact” on the debt ceiling deal. The sellers once again leant on the red 21 moving average targeting the key 32684 support. The bias for the Dow Jones remains skewed to the downside as the moving averages are crossed to the downside and the market keeps printing lower lows and lower highs.
Nonetheless, we should expect the buyers to start defending this support zone as a break below it would open the door for a bigger fall into the 31645 level. Now that the debt ceiling risk is out of the way, we can start to care more about the economic data again.
Dow Jones Technical Analysis
On the 4 hour chart below, we can see that the recent bounce from the 32684 support got rejected at the previous swing low resistance and the 61.8% Fibonacci retracement level.
Yesterday, the Dow Jones sold off as the US Jobless Claims came out much better than expected raising the odds for the June hike to 70%. Soon after though, some Fed officials hinted that it may be better to skip the June hike to buy time to see more data and the Dow erased the losses from the Job Openings release.
The data to watch on the calendar today is the US Jobless Claims and the ISM Manufacturing PMI report but good data shouldn’t be market moving given the recent comments from the Fed members. Maybe only a big miss would move the market and it should weigh on the Dow Jones as the market may start to fear the recession.
In the 1 hour chart below, we can see that in the near term the trend is still bearish with the last lower high standing at the 33070 level. The buyers will need to break above that level if they want to switch the short-term trend to the upside and target the 33300 resistance. A breakout of the 33300 zone should open the door for a rally towards the 33724 resistance. The sellers, on the other hand, may lean on that 33070 lower high with a tight risk above it and target the 32684 support and eventually a breakout. Alternatively, we should find the sellers waiting on the 33300 resistance with the same playbook.
The biggest event of the week will be the NFP report tomorrow. Good data with higher-than-expected average hourly earnings should weigh on the Dow Jones as the market may really start to fear a wage price spiral. Good data with a miss in average hourly earnings should be the best-case scenario for the bulls and the Dow Jones should rally.
Bad data, on the other hand, should weaken the Dow, but it wouldn’t be the first time that we see the market rallying just because it expects less hikes and forgets about the deterioration in the economy. The technicals should help in that case.
