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Dow Jones Price Outlook: Election Rally Sends DJIA to Overbought Territory

Dow Jones Price Outlook: Election Rally Sends DJIA to Overbought Territory

2020-11-04 21:30:00
Peter Hanks, Analyst
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Dow Jones Price Forecast:

Dow Jones Price Outlook: Election Rally Sends DJIA to Overbought Territory

The Dow Jones stands on the cusp of overbought territory after enjoying a remarkable rally this week. After suffering significant losses in late October, risk appetite has come roaring back and bringing the Dow Jones with it. Nearing overbought territory and lacking a clear-cut winner in the election, can risk appetite persevere through these potential headwinds and continue higher? Or will the Dow Jones, Nasdaq 100 and S&P 500 slow their ascent?

Wall Street MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -21% 19% 0%
Weekly 32% -21% -7%
What does it mean for price action?
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To be sure, IG client sentiment data reveals retail traders have shifted aggressively to the short side. Since we typically take a contrarian view to crowd sentiment, this could suggest the Dow has more room to run. That being said, there are levels of resistance overhead that the index will have to contend with.

Dow Jones Price Chart: 4 – Hour Time Frame (June 2020 – November 2020)

dow jones price chart

Nearest the current trading price stands the Fibonacci level around 28,000. Exhibiting lackluster influence in Wednesday trading, the area may serve only as an intraday marker as it seems to lack merit on a longer-term basis. Still, it stands between price and secondary and tertiary resistance levels around the 28,455 and 28,760 marks respectively. 28,760 is derived from the trendline projection off the September and October peaks while 28,455 is the next Fibonacci level.

Nasdaq 100 Forecast: Tech Stocks Soar Despite Election Uncertainty

Should risk appetite recede, leading to declines for the Dow Jones, initial support may reside around the 27,630 Fibonacci level followed by 27,265. Either way, a significant pullback in the volatility index (VIX) may see price action slow regardless of direction. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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

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