Talking Points
-Dow Jones has made little net progress over the past 3 weeks
-Bearish resistance suggests a possible 5-7% selloff
-DJIA support near 16,500 and possibly 15,750
Dow Jones Industrial Average (DJIA) has been made little net progress over the past 3 weeks. We wrote on March 22 how the uptrend at that time was at risk of reversing 5-7%. To date, that hasn’t happened. Price hasn’t busted higher either keeping the March 22 levels intact.
The subsequent sideways action does not clarify the picture for us. An argument could be made the recent range is a pause in the uptrend. Bears would argue that uptrends don’t always end in dramatic fashion and that an uptrend would need to turn sideways before turning lower. Therefore, bears would argue, we are on the cusp of a selloff.
Created using FXCM’s Marketscope Charts
Continuing on the bear argument, one could also suggest that the top placed on April 4 has begun to create impulsive moves lower. On smaller time frame chart of the US30, a CFD which tracks the DJIA noted above, we have a series of lower highs and lower lows. So far, the waves lower of 17,585 on April 5 and 17,482 on April 7 are equal in length.
An equal wave pattern suggests shorts need to be cautious. For those traders trying to pinpoint an entry, the equal wave pattern would suggest it is too early to enter short. Therefore, bears may want to sharpen their claws while they wait for even lower levels to print.
A price print below 17,396 would create a lower low on the daily chart. At that point, bears could consider letting themselves out of the cage. Just like we wrote on March 22, a print above 18,000 would suspend the immediate bearish outlook.
Target levels are 16,500 and 15,750.
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Market Interpretation
Market Condition: Breakdown
Bias: Short US30 (a CFD that tracks Dow Jones)
Entry: Near 17,396
Stop Loss: Near 18,000 (-604)
First Target: Near 16,500 (+896)
Second Target: 15,750 (+1,646)
Suggested Reading/Viewing:
Dow Jones Industrial Average 7 Day Win Streak at Risk (March 22 report)
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