Last Friday, the Dow Jones ended the day negative following the US NFP report. There was something for everyone. In fact, for the buyers, the payrolls number beat expectations while the average hourly earnings missed. For the sellers, the unemployment rate jumped to 3.9% and the household survey showed a third consecutive month of job losses. In this case, the technicals should help in determining the next move for the market as we break some key levels.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones broke out of the rising wedge to the downside and the buyers failed to rally back above the bottom trendline. This has opened the door for a bigger correction into the 38043 level first and upon a further break lower, the 37128 level. The sellers will now pile in with more conviction to position for the drop into new lows. The buyers, on the other hand, will want to see the price reversing and rising back above the bottom trendline to invalidate the bearish setup and target new highs.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, given the break of the wedge, we could be in front of a reversal. We can see that the price recently got rejected from the resistance formed by the downward minor trendline and the red 21 moving average. That’s where the sellers stepped in with a defined risk above the trendline to position for a drop into the 38043 level.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the rejection from the downward trendline. The sellers are now in control and a break below the swing low at 38570 should trigger a stronger selloff as the sellers will increase the bearish bets into new lows. The buyers should wait for the price to reach the 38043 level to buy the dip with a better risk to reward setup or wait for the price to break above the downward trendline to invalidate the bearish setup and position for new highs.
Upcoming Events
Tomorrow we have the main event of the week, that is the US CPI report. On Thursday we get the US PPI, the US Retail Sales and the US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.