Last Friday, the Dow Jones extended the pullback from the highs reached after a strong rally triggered by the FOMC decision. This might have been just a profit-taking move from overstretched levels as nothing has changed in the data as we got strong US Jobless Claims figures and good US PMIs. Looking ahead, we are approaching a new month where we get the key economic data including the US CPI. The path of least resistance though remains to the upside until the labour market cracks or the reacceleration in inflation gets confirmed and we get some hawkish repricing in interest rates expectations.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones is trading inside a rising channel and continues to diverge with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it should be a signal for a pullback into the lower bound of the channel where we will also find the red 21 moving average for confluence.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers will have a much better risk to reward setup around the lower bound of the channel where we can find the confluence of the 61.8% Fibonacci retracement level and the daily 21 moving average. The sellers, on the other hand, will want to see the price breaking lower to confirm the reversal and position for a bigger correction into the base of the channel at 37128.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support zone around the 39450 level where we can find the confluence of the red 21 moving average, the trendline and the 50% Fibonacci retracement level. This is where the buyers are likely to step in with a defined risk below the support zone to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price breaking lower to position for a drop into the lower bound of the channel.
Upcoming Events
This week is going to be shortened by the US Holiday on Friday. Tomorrow, we have the US Durable Goods and Consumer Confidence reports. On Wednesday we have Fed's Waller speaking. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude with the US PCE report and Fed Chair Powell.
