Yesterday, the Dow Jones dropped following the big beat in the US PMIs as the rise in Treasury yields weighed on the market. The data was still in support of the soft-landing narrative with the commentary in the PMI report citing fastest output growth in seven months and sharp cooling in inflation. Given the resilience of the labour market and consumer spending, the rate cuts continue to be pushed back a little, but as long as the disinflationary trend remains intact, we can expect the Fed to proceed with the “insurance” cuts anyway.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones yesterday fell into the close with the price now standing right around the previous high and the blue 8 moving average. This is where we can expect the buyers to step in with a defined risk below the level to position for a rally into another all-time high. The sellers, on the other hand, will want to see the price breaking lower to target a bigger correction into the 37066 level.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a good support zone around the previous high as there’s also the confluence with the 38.2% Fibonacci retracement level and the moving averages. A break below the support should give the sellers even more conviction for a drop into the 37066 level.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the recent price action formed what looks like a double top with the support zone around the previous high being the neckline. What happens around this level will likely decide where the price will go in the next few weeks. A bounce should lead to a rally while a breakout is likely to trigger a selloff into the 37066 level.
Upcoming Events
Today we will see the Advance US Q4 GDP and the latest US Jobless Claims figures. Tomorrow, we conclude the week with the US PCE report.
