Last week, the Dow Jones came under pressure due to geopolitical fears and a general sense of risk aversion. The latest developments have seen Israel retaliate against Iran, but the latter has played down the airstrikes. This episode could be behind our backs, although it would be worth monitoring if it were to become worrying again. On the macro front, the Fed’s rhetoric has become more hawkish, particularly in the latter part of the week, as inflation growth appears to have stalled. Overall, last week saw many bearish catalysts weighing on the market. So we will likely need some positive data on the inflation front this week to reverse the trend.
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 the price remained stuck in a consolidation just below the second key level. We also got a break above the downtrend line, which could be an early signal of a bigger pullback. Buyers will need the price to break through the 38043 level to increase the chances of a bullish move and position themselves for a rally towards the resistance at 38464. Sellers, on the other hand, will likely intervene around the 38043 level with risk set at -above to position for a decline towards support 37128.
Dow Jones Technical Analysis – 1 Hour Time Frame
Dow Jones 1 hour
On the hourly chart, we can see the resistance zone around level 38043 more clearly with several rejections from it. The moving averages over this time frame have moved higher and we have a divergence with the MACD, which could be another early signal of a bullish move towards the resistance at 38464. Should price break through a rise and reach the zone 38464, we can expect sellers to rush into it more aggressively, as they will have an even greater risk of rewarding the setup to target a decline into support 37128. Buyers, on the other hand, will want to see the price rises higher to increase bullish bets to a new all-time high.
Events to come
This week is a bit empty on the data front with only a few notable releases. We start tomorrow with the US PMIs. On Thursday we will receive first quarter US GDP and the latest US jobless claims figures. On Friday, we conclude the week with the US PCE report.
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