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DJIA: Dow Tests 2018 Trend-Line Support as Bears Continue to Push

DJIA: Dow Tests 2018 Trend-Line Support as Bears Continue to Push

James Stanley, Senior Strategist

DJIA: Dow Tests 2018 Trend-Line Support as Bears Continue to Push

Dow Jones Talking Points:

- Sellers are back in US stocks and after a rough session yesterday, the Dow has set a fresh November low with a bit of support showing off of the 2018 bullish trend-line in the index.

- The next two trading days bring holiday conditions to US markets, and US exchanges are closed on Thursday in observance of Thanksgiving, with Friday being half-day sessions that go until 1PM ET.

- 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.

It’s been a tale of two themes so far in November for US stocks, and this follows what had become a troubling month of October. US equities came into Q4 in a very bullish state following a Q3 full of fresh highs and bullish breakouts; but just a few days into the new quarter that music began to slow until, eventually, it came to a screeching halt. Sellers took over in the second week of October and continued to push the Dow Jones lower into the end of the month.

A support bounce developed there, assisted by a bullish trend-line as taken from the earlier-year lows; and this got November started on a more positive note as it appeared as though the ‘buy the dip’ backdrop was back. In the first week of November, prices retraced 76.4% of that October sell-off, finding a bit of resistance at the retracement that rested at 26291; and this resistance began to show up around the FOMC rate decision earlier in the month.

Since then, bears have been in-charge and prices have reverted right back down towards those prior October lows; with a bit of support showing around the 2018 bullish trend-line.

Dow Jones Daily Price Chart

DJIA Dow Jones Daily Price Chart

Timing Difficulty

Tomorrow brings Thanksgiving, which means US equity markets will be closed for the session. And the day after brings Black Friday, which will see a half-day across both the NASDAQ and the NYSE, which will further constrain potential around short-term price movements.

The big question at this point is when/if/where the buy the dip strategy might come back; or whether we’re sitting on the cusp of a fresh bearish theme that could further see post-February gains driven out of the Dow Jones Industrial Average. On a shorter-term basis, it appears as though that bullish theme may remain on hold for a while longer. Today is bringing a bounce after yesterday’s push down to fresh November lows; but, as yet, buyers haven’t really made much of a stand to push back towards the 25k psychological level.

DJIA: Dow Jones Four-Hour Price Chart

DJIA Dow Jones Four Hour Price Chart

Dow Jones Moving Forward

At this point, the index appears to be in an unattractive spot for either long or short strategies, particularly given the difficulty of timing with the holiday fast approaching. For traders that are looking for directional themes on the index, a break-below the June low around 24k could open the door for bearish breakout strategies; while a topside break above the psychological level can begin to re-open the door to possible bullish strategies. At this point, the matter remains unclear, and traders may want to stand aside until more detail can be seen.

Dow Jones Daily Price Chart

Dow Jones DJIA Daily Price Chart

In the meantime, bearish strategies remain attractive in European bourses, as the DAX is bouncing after setting fresh 18-month lows just yesterday. That support showed-up at a key trend-line; but if sellers are able to push during holiday-light markets in the latter portion of this week, the pressure can remain.

DAX Weekly Price Chart: Trend-Line Bounce From Fresh 18-Month Lows

dax weekly 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

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

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