The positive risk sentiment supported by the soft-landing narrative gave the Dow Jones a tailwind to climb to new highs. The miss in the US CPI report coupled with the strong labour market data, as confirmed again last Thursday with the US Jobless Claims, and the improving consumer sentiment, as shown by the University of Michigan report last Friday, keep giving the buyers strength and conviction to bid the index to new highs.
Moreover, the US Retail Sales recently missed on the headline number, but the Control Group, which is seen as a better gauge of consumer spending, beat expectations. So, all else being equal, we should see the Dow Jones reaching new highs going forward barring a black swan event or ugly economic data.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones has bounced again on the 33872 support and started a big rally towards the 35289 resistance. This is where we should see strong sellers stepping in with a defined risk above the level and target a bigger pullback into the trendline first and, upon a break lower, the 32684 support. The buyers, on the other hand, will need a break above the resistance supported by a fundamental catalyst to start targeting the all-time high.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we are already seeing the price reacting to the resistance as the sellers are starting to pile in. If we get a minor pullback, the buyers can lean on the trendline where we can also find the 38.2% or 50% Fibonacci retracement levels and the red 21 moving average for confluence to position for a breakout. The sellers, on the other hand, will want to see the price breaking below the trendline to pile in even more aggressively and target the 32684 support.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor divergence with the MACD right at the resistance. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we should see a pullback into the trendline where the buyers are likely to step in while the sellers will wait for a further break lower.
Upcoming Events
Today the main event will be the US Jobless Claims report. The market is riding the soft-landing narrative, so a small miss to the expectations shouldn’t cause too much damage and in fact it might be just another opportunity to buy the dip. At the moment, it looks like only a big miss can cause some recessionary fears and lead to a bigger selloff, while a beat should see the Dow Jones rallying back to the highs again.
See also the video below: