It looks like the more hawkish than expected FOMC Dot Plot last week was kind of a wakeup call for the market as it’s been selling off with almost no pullback ever since. The resilience in the economy is keeping the Fed on the hawkish camp as it wants to see more weakness in the data, especially on the labour market front. We’ve seen a huge rally since the lows back in October 2022 as the market continued to see a soft landing but even Fed Chair Powell said that it’s not his base case, although they are aiming for it. With so many bearish drivers that accumulated throughout the first half of 2023, the market might be at risk of a major fall now.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones broke below a key support level yesterday opening the door for a fall into the 32597 level. A much better place to sell would definitely be the downward trendline and the 61.8% Fibonacci retracement level, but at the moment is hard to envision a rally into those levels. After such a big selloff though, a pullback might be in the cards.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a resistance zone around the 34000 level where we can find the 38.2% Fibonacci retracement level and the red 21 moving average for confluence. That’s where we can expect the sellers to pile in with a defined risk above the resistance to position for a fall into the 32597 level. The buyers, on the other hand, are likely to step in here to target a rally into the major trendline.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is retesting the broken support turned resistance where we can also find the minor trendline and the red 21 moving average. We can expect the sellers already coming into the market here, but a break above the resistance should lead to a rally into the next resistance around the 34000 level.
Upcoming Events
Today the main event will be the US Jobless Claims report. At this point, looks like there’s not much difference if it’s strong or weak data as the former would keep the Fed hawkish and even raise the risk of higher rates, while the latter might point to a recession. Nonetheless, the last time the market rallied on weak data as it decreased the risk of further tightening and brought down Treasury yields. Tomorrow, we will see the latest US PCE data which is unlikely to change much in terms of market pricing unless we see some big surprises.