Last week, the Dow Jones couldn’t extend the rally into a new all-time high as the stronger than expected inflation data and the quick rise in Treasury yields weighed on the stock market. There’s been also some profit-taking as we approach the FOMC rate decision on Wednesday with the risk of a hawkish surprise. Overall, the market is likely to remain supported as long as the Fed does not restart to hike rates, or the economy does not falter.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones broke out of the rising wedge recently and started to consolidate just beneath the bottom trendline. The breakout opened the door for a bigger correction into the 38043 level, but the strong battle between buyers and sellers led to a rangebound price action ahead of the FOMC rate decision. There are no catalysts now trading into the event, so the technicals will likely lead the price action.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price managed to break above the downward trendline but got smacked back down following some strong US data that raised the risk of a hawkish Fed on Wednesday. We now have a range between the 38461 support and the 39119 resistance, so the market participants will likely “play the range” by buying at support and selling at resistance until we get a breakout.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent rangebound price action. If the dip-buyers come into the market strongly, then a break above the recent swing high at 38930 could lead to a break above the 39119 resistance, although it might be better to wait for the FOMC before taking new trades.
Upcoming Events
This week we have the FOMC rate decision on Wednesday where the Fed is expected to keep rates unchanged. The market will be on the lookout for hawkish surprises though following the stronger than expected inflation data. On Thursday, we conclude with the latest US PMIs and Jobless Claims figures.
