Yesterday, the Dow Jones extended its fall to new lows despite the absence of bearish catalysts. In fact, we had a pretty bearish day in most markets, with heavy selling in the US dollar, Treasury yields and some commodities. Geopolitically, little has changed as Israeli retaliation continues to be delayed and it is not even clear whether they will strike now.
On the macroeconomic front, the market has priced in almost all of the rate cuts in 2024, as it only expects one cut later in the year. Data-wise, we don’t have much to work with in the coming weeks, except for PCE, which the Fed has already indicated is slightly higher but virtually unchanged.
Dow Jones Technical Analysis – Daily Timeline
Dow Jones Daily
On the daily chart, we can see that the Dow is trading in an ascending channel and continues to diverge with the MACD for a long time. This is usually a sign of weakening momentum, often followed by pullbacks or reversals. Recently, we had a breakout that opened the door for a larger correction towards the 37128 level. Sellers managed to break the second key support level and will now target a decline towards the third and final at 37128. Buyers , on the other hand, will have to break the current downtrend to start aiming for new highs.
Dow Jones Technical Analysis – 4 hour time frame
Dow Jones 4 hours
On the 4-hour chart we can see that price was rejected by the downtrend line and the blue 8 moving average as sellers continued to build on them with risk set above the line trend to position itself at new lows. If we get another pullback, we can expect sellers to again intervene around the trendline to position themselves for a fall towards the third key support. Buyers, on the other hand, will want to see the price rise to invalidate the bearish setup and position themselves for a rally to a new all-time high.
Dow Jones Technical Analysis – 1 Hour Time Frame
Dow Jones 1 hour
On the hourly chart we can see that any rallies have faded as sellers have continued to pile in around the trendline while continuing to target the support at 37128. We can notice that we are starting to see some divergence with the MACD, which signals a weakening of bearish momentum. Price action could also form a descending triangle, so a breakout on either side would likely trigger a sustained move.
Events to come
Today we receive the latest unemployment claims figures in the United States.
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