The Dow Jones yesterday fell hard into the close with no clear catalyst. It might have been just profit taking as the market was anyway getting more and more overstretched. The only notable economic release was the US Consumer Confidence report where the data beat across the board. We are now close to the Christmas holidays and liquidity is likely to get thinner which increases the risk of bigger swings. Today the market will focus on the US Jobless Claims figures as the labour market continues to be a key spot to watch for the soft-landing narrative.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones yesterday dropped hard into the close as some profit taking might have been triggered. The price was anyway overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move. In this case, we got the pullback into the previous all-time high which is going to act as support now.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have some more confluence around the 36945 support as we can find a trendline, the 38.2% Fibonacci retracement level and the red 21 moving average. This is where the buyers are likely to step in with a defined risk below the support to position for another rally into new highs. The sellers, on the other hand, will want to see the price breaking below the support to pile in and target a drop into the 35683 level.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action and we can notice that the latest leg higher diverged 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 trendline, but if the price were to break below the support, the reversal would be confirmed, and the sellers will gain even more conviction to target much lower prices.
