Dow Jones, S&P 500 Outlook:
- The Dow Jones closed narrowly above 25,225 – an important level in the past three months
- Meanwhile, the S&P 500 reclaimed the pivotal 2,800 level
- Retail traders are overwhelmingly short the Dow Jones and S&P 500, find out how to use IG Client Sentiment Data with one of our Live Sentiment Data Walkthroughs
Dow Jones, S&P 500 Outlook: Indices Retake Key Technical Support
The Dow Jones and S&P 500 looked to undo losses posted in Monday’s session as they boasted their largest intraday rallies since January. A series of comments from Federal Reserve Chairman Jerome Powell early in the session boosted optimism regarding potential rate cuts which contributed meaningfully to the recovery. While some traders look for a continuation rally heading into Wednesday, both indices are precariously near support – exacerbating vulnerability to opening gaps like the Index faced in May.
Dow Jones Price Chart: Daily Time Frame (February – June 2019) (Chart 1)
The Dow Jones recaptured 25,225, posting its largest intraday rally since January 4. The area has influenced price in the past – posing as the neckline in a recent head-and-shoulders pattern. Still, the Industrial Average will need to distance itself before the level can hope to inhibit another concerted move lower. An initial open above 25,225 is the first step traders should look for if a bullish continuation is to occur.
If accomplished, the Index can look to retake the 200-day moving average to the topside around 25,400. If optimism continues, it will also have to negotiate a descending trendline from May, outlined in the weekly technical forecast. If pessimism returns, immediate support will reside at 24,943 and 24,797. If selling occurs in earnest, secondary support exists at 24,325 and 24,120
S&P 500 Price Outlook
The S&P 500 convincingly drove through its 200-day moving average, closing just north of the widely-watched 2,800 level. Unlike the Dow Jones, the S&P 500 could enjoy greater buoyancy from reclaimed support, but again, mind the gaps. Either way, the Index will now look to hold the 2,800 level and surpass the descending trendline from May and confluent Fibonacci support from 2,811 to 2,815 if it is to continue higher.
S&P 500 Price Chart: Daily Time Frame (February 2019 – June 2019) (Chart 2)
To the downside, the 200-day moving average should look to buoy price before the S&P 500 can retest a confluence of Fib levels around 2,722 to 2,715 – an area which has held since mid-March. That said, Wednesday’s opening price action will be pivotal for the Index.
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Should it gap above resistance – an extended short squeeze could develop while simultaneously creating risky unfilled space underneath the confluence of technical levels. At the time of this article’s publication, S&P 500 futures have timidly extended their climb to 2,805. As price action unfolds, follow @PeterHanksFX on Twitter for updates.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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