Dow Jones: Pullback Potential After Indecision Follows Failed Breakout
Dow Jones Talking Points:
- US Equities have continued to pullback after the Tuesday run up to fresh highs. In Dow futures, support showed after the US close on Tuesday afternoon; but that strength was soon faded after the US open yesterday. This equates to two consecutive days of indecision following a false-breakout at fresh six-month-highs, and this may be preluding a deeper pullback in the index before the longer-term bullish trend is ready for continuation.
- We looked at two short-term support levels in our Tuesday article combined with an area of interest for longer-term, bigger-picture plays. The first level helped to support prices into yesterday’s open, but a day later and sellers have pushed right back to this area on the chart. This would de-emphasize the attractiveness of the second zone of support potential around 25,500, while the deeper level with longer-term potential remains of interest around 25,370.
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Dow Jones Pullback Continues
US stocks are continuing to hold on to the pullback that started to show a couple of days ago. This happened shortly after the S&P 500 set a fresh all-time-high while the Dow Jones Industrial Average set a new six-month high on Tuesday of this week. In our Tuesday article, we looked at the prospect of bullish continuation in the index, focusing-in on two key areas of short-term support at 25,695 and 25,550, respectively. The first of those levels came into play after the US equity close on Tuesday afternoon, and prices soon moved-higher. But that enthusiasm again showed signs of waning around yesterday’s US open, and prices have continued to retrace since.
Dow Jones Hourly Price Chart: Support Bounce Falters as Pullback Continues
Chart prepared by James Stanley
At this stage, the concern would be one of a bigger-picture basis as price action on the Daily is starting to show signs slowing down after an inability to sustain the breakout to fresh six-month highs. We’ve now seen two consecutive days of indecision on the Daily chart, and given the context with which we had coming into the move, that’s not a positive for Dow bulls.
This highlights the potential for a deeper pullback, and this brings to question the viability of that second area of support potential we looked at on Tuesday. For traders looking to address the Dow in a less aggressive manner, a more attractive area of potential support exists a bit-lower on the chart, around the 14.4% Fibonacci retracement of the post-election move in the index. This was also the June swing-high, and this price action has shown a few different iterations of short-term support and resistance over the past month.
Dow Jones Daily Price Chart: Pullback Potential After Two Days of Indecision Followed Failed Breakout
Chart prepared by James Stanley
To read more:
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.