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Dow Jones Talking Points:

- US equities have continued to recover from the Q4 sell-off, and the Dow Jones Industrial Average is making a move back-towards the 26k psychological level.

- Later today brings FOMC minutes and the Dow’s move may be nearing an overextended state. The bigger question is how aggressive buyers might remain to be after a strong start to 2019.

- 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.

Dow Jones Marches to 26k

It’s as if a light switch were turned on the morning of Christmas, as selling in US equities turned-on-a-dime. And what initially looked like a short-squeeze held into the New Year as buyers came back, helping to stage a string of strength in 2019 that’s, so far, brought 11.4% back into the Dow Jones Industrial Average. That’s not a small move by any stretch of the imagination, but it does become a bit less enthusiastic when considering that the index had given-up -19.8% from the October 3rd high down to the December 26th low.

DJIA: Dow Jones Daily Price Chart

DJIA Dow Jones Daily Price Chart

Chart prepared by James Stanley

At this stage, the item of complexity is one of a directional nature: As in, the up-trend has been strong and consistent, but for how much longer might buyers be able to push-higher without more of a pullback? A similar scenario presented itself a couple of weeks ago after the Dow began to struggle after testing the 25,400 level; but after a three-day pullback and a re-test of the 25k level for support, buyers came back to drive-up to fresh 2019 highs.

Prices in the Dow are now approaching the November and December swing-highs, which come in around 26,287 and 26,082, respectively. RSI has made a move into overbought territory, indicating that the current topside run may be nearing an overextended state as a series of resistance items loom ahead.

DJIA: Dow Jones Daily Price Chart

DJIA Dow Jones Daily Price Chart

Chart prepared by James Stanley

Dow Jones Support Potential

On the support side of the matter, a number of potential areas remain of interest. Nearby is the zone created from the 76.4 and 78.6% Fibonacci retracements as taken from the Q4 sell-off. The 78.6% marker has already exhibited a bit of short-term support, but buyers have yet to push up to a fresh high. This zone can be followed from the 25,699-25,816 area on the chart, and this could be looked at as an aggressive area to seek out that next higher-low.

A bit lower on the chart is the 25,600 area that was looked at last week. This is a confluent area of Fibonacci support/resistance, and this area had previously held the highs in the index until last Friday’s breakout. A little lower is an area of prior swing support, spanning from 25,257 up to 25,324. Below that, the 25k level becomes of interest again, as this area helped to cauterize the February lows in the pair. If buyers are unable to hold prices above this level, the bullish theme should come under evaluation as something in the backdrop has likely changed.

DJIA: Dow Jones Four-Hour Price Chart

DJIA Dow Jones Four Hour Price Chart

Chart prepared by James Stanley

You may also be interested in:

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