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Dow Jones Talking Points:

- The Dow Jones Industrial Average remains near yearly lows as the end of 2018 nears following a strong bearish push after this week’s FOMC rate decision.

- With Daily RSI on the index moving into oversold territory, there could soon be potential reversal setups of interest; but a lack of nearby technical structure makes that a challenging prospect given the likelihood of low-liquidity conditions over the next week-and-a-half.

- DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro 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.

The year of 2018 is nearing its end in a very similar manner to how it began, at least across US equities. A sell-off showed up in stocks in the month of January, and that theme of pressure remained through Q1. Recovery began to show in April upon the open of Q2, and that theme hit fever pitch in Q3 as both the Dow and S&P 500 put in consistent bullish trends to push up to fresh all-time-highs.

But that music began to slow as the door opened into Q4, and the month of October saw an abrupt stop as sellers took over. Despite retracement rallies in early and late-November, the Dow Jones Industrial Average has been unable to overcome the slump, and with the end of 2018 nearby, the index remains perched very near those 2018 lows.

Dow Jones Daily Price Chart

dow jones daily price chart

Chart prepared by James Stanley

At this point, prices in the Dow are at a fairly challenging spot on the chart. RSI on the Daily chart has made a move into oversold territory, but there’s a lack of nearby support levels that can be used for reversal plays. Also of issue is timing, as next week brings Christmas and the week after brings New Years; making for an environment that will likely be punctuated with low liquidity in the coming weeks.

Dow Jones Daily Price Chart

djia dow jones daily price chart

Chart prepared by James Stanley

Moving Forward

At this stage the most attractive path forward appears to be one of prudence and patience. While the potential for either a deeper sell-off or a reversal from the lows both remain as possible outcomes, a lack of nearby technical structure combined with a series of messy drivers combined with holiday conditions makes for a daunting backdrop when taking directional stances on US equities.

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 Q4 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