Yesterday, the Fed kept interest rates unchanged as expected but that's not what the market was looking for going into the event. The market was focused solely on the Dot Plot and the Fed decided to validate the market's dovish pricing projecting a 2024 year-end peak rate at 4.6%. The expectations were for the Fed to keep two rate cuts for 2024, but the Fed decided to increase that to three, basically agreeing with the market that rate cuts are coming.
Moreover, Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long, which suggests that a rate cut could come pretty soon. This gave a strong boost to the Dow Jones leading to new highs with the sentiment turning heavily bullish.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones made a new all-time high yesterday following the Fed’s pivot. This rally incredible rally has been a straight line since the end of October with almost no opportunities to catch a decent pullback. Chasing the price now doesn’t look like a good idea from a risk management perspective, although the FOMO can be really strong now.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a trendline now connecting the most recent swing lows. If we get a pullback from the all-time high, the buyers are likely to lean on the trendline where they will also find the red 21 moving average for confluence. Moreover, we can see that the latest leg higher is diverging with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price recently broke out of the consolidation marked by the blue box and extended the rally to new highs. We can also notice that on this timeframe, the buyers will find the 50% Fibonacci retracement level around the trendline and the moving average for extra confluence. The sellers, on the other hand, will want to see the price breaking below the trendline to position for a drop into the 35683 support.
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Today we will see the latest US Retail Sales and Jobless Claims figures, while tomorrow we conclude the week with the US PMIs.