Yesterday, the Dow Jones continued to retreat from the highs as the market is waiting for the key catalysts in the next few days and weeks. Nothing has changed in the bigger picture as the Fed is still considering rate cuts conditional on the disinflationary trend being intact. The data has been good but what will matter the most is the next CPI report as that will tell us if the progress on inflation has indeed stalled, or worse, reversed. Before that we will get many important reports including the NFP, but as long as they remain benign the market will likely keep on rising.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones price action has formed a rising wedge coupled with the usual divergence with the MACD. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we are seeing a pullback into the bottom trendline where we can expect the buyers to step in to target new highs. The sellers, on the other hand, will want to see the price breaking lower to confirm the reversal and target the 37128 level.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see even better the rising wedge formation and the divergence with the MACD. We can also notice that we have the 50% Fibonacci retracement level around the bottom trendline for extra confluence. This is where we can expect the buyers to step in with a defined risk below the trendline 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 invalidate the bullish setup and position for a drop into the 37128 level.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have now a resistance zone around the 39000 level where we have also the red 21 moving average for confluence. The sellers are likely to lean on this zone to position for a break below the bottom trendline with a better risk to reward setup. The buyers, on the other hand, will want to see the price breaking higher to pile in and target new highs.
Upcoming Events
Today we will see the US PCE and the latest US Jobless Claims figures, while tomorrow we conclude the week with the US ISM Manufacturing PMI.