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Dow Jones Industrial Average Weak in the Knees on DB Woes

Dow Jones Industrial Average Weak in the Knees on DB Woes

2016-09-30 13:25:00
Jeremy Wagner, CEWA-M, Head of Education

Talking Points

-Deutsche Bank holding down risk flows for Dow Jones Industrial Average (DJIA)

-Wait for a break of 18,460 (for long) and 17,903 (for shorts) to mark off key levels to determine the short term trend

-This is a shorter term outlook for DJIA; Download our quarterly forecast for a longer term equities forecast.

With Deutsche Bank dominating the financial news, concerns of insolvency are spooking investors. The concern is that if DB continues to falter, how does that impact other financial institutions or main street businesses? Right now, it is more questions than answers which is why main equity markets like Dow Jones Industrial Average has been trading heavy.

Suggested Reading:US Dollar to Join Yen Rally as Deutsche Bank Sours Sentiment

For the past 2 weeks, DJIA has been consolidating in a tight trading range just above a 7 month trend line (not shown). The inability of DJIA to bounce and break higher off this trend support has me concerned that a break down may be queued up. Though the technical support hasn’t broken yet, when the market doesn’t react to a long standing trend line, the opposing may forces may be too much to “bear” (pun intended).

Dow Jones Industrial Average Weak in the Knees on DB Woes

Upon inspection of a shorter time framed chart, a move below 18,077 may be an early warning signal for continued losses as prices would be falling outside of this blue trend channel. A continued break down below 17,903 would signal additional losses are probable. If prices do break down, we’ll consider lower levels to eventually buy a dip. If that happens, we’ll fine tune the pricing later, but for now the general area of dip buying is near 17,000.

To the upside, we have the September 22 high of 18,450 as this represents the top end of the range. If prices move above there, it opens the door to new all-time highs.

If you are interested in what the shorter term momentum looks like as DJIA approaches either 18,450 or 17,903, check out our GridSight Index. (Change the chart setting from “EUR/USD” to “US30” on either “m5” or “m10”.) The GSI is a big data indicator that analyzes what past patterns and how they have historically developed.

Check out GSI here.

Suggested Reading/Viewing:

Deutsche Bank Isn’t Lehman Brothers, But It Can Still Spur Systemic Risk

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.