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DJIA Talking Points:

- The equity recovery from the October sell-off continues, and bulls brought another gust of pressure to the bid today following the results from mid-term elections in the US last night. This has helped the Dow Jones Industrial Average make a move back above the 26k level following last week’s re-claim of 25k.

- The forecast for the Dow this week was set to bullish in the Weekly Technical Forecast, looking for a zone of higher-low support to hold after buyers put in the initial stages of recovery last week. But now that the support zone has played out, where can bulls look for that next area of higher-low support? I look into two nearby areas in the article below.

- DailyFX Forecasts on a variety of currencies and indices such as the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

Dow Bulls Get Back to Work

It’s been a strong day so far for global equities following the results of mid-term elections in the United States last night, and this extends a trend that’s now exhibited a week-and-a-half of gains following some fairly visible October pain.

That October sell-off appeared to be driven by a myriad of reasons, as sellers showed up shortly after the Q4 open and didn’t really show signs of letting up until last Tuesday. During this run, the Dow gave back more than 2,800 points for a -10.5% loss from the October high to the October low; and warning signs were beginning to show that the risk trade may be in for a bigger-picture slump should bulls fail to respond.

One of those risk items has left the horizon after yesterday’s mid-term elections and despite President Trump’s Republican party losing a majority in the House, they gained seats in the Senate. While this could possibly spell a recipe for gridlock and more investigations, it could also open the door to infrastructure spending as President Trump reaches across the aisle to further implement growth-oriented initiatives with a slightly different flavor than his first two years in office when the GOP held a supermajority.

US Equities, by and large, are upbeat after yesterday’s elections, and this has helped the Dow Jones Industrial Average to encroach again upon the 26,000 level that hasn’t been seen since the sell-off was getting ramped up in early-October.

Dow Jones Daily Price Chart: Bulls Back In a Decisive Manner

dow jones daily price chart djia

Chart prepared by James Stanley

Last week I had looked at bullish strategies based off of higher-low support in the Dow as we were in the early stages of recovery. That zone was around the 25k psychological level, running up to the 61.8% retracement of the Q3 bullish move.

I reiterated that stance in this week’s Weekly Technical Forecast for Equities. Since then, the DJIA has been running-higher and we’re now trading well-above the 38.2% marker of that same major move.

DJIA Two-Hour Price Chart

Dow Jones DJIA Two Hour Price Chart

Chart prepared by James Stanley

DJIA Moving Forward

Given the robust bullish response that’s been seen over the past six trading days, it would appear that bulls are back in charge on US stocks, and this could help denominate short-term stances in the index. Caution should continue to be utilized as volatility can beget more volatility and given the number of still outstanding issues, the possibility of another reversal may be around-the-corner as driven by headline flow.

But there are two areas of higher-low support potential above last Friday’s swing-low that can keep the door open for bullish strategies in the index. The first area is around the 38.2% Fibonacci retracement of the Q3 bullish move, and I’ve connected that price to the Friday swing-high around 25,728 to create a zone. A bit lower, from the 50% marker of that same major move up to the 25,500 level is a second zone that could be used for higher-low support potential.

DJIA Two-Hour Price Chart

DJIA Dow Jones Two Hour Price Chart

Chart prepared by James Stanley

You may also be interested in:

The Dow Spends a Week at Support: Will Bulls Follow-Through?

Equity Forecast for Dow, S&P 500, DAX, FTSE and Nikkei

Day Trading the Dow Jones: Strategies, Tips & Trading Signals

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q3 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX