Bottom line: Dow Jones long term structure continues to remain bearish against 29600 highs in February 2020. A lower high also seems to be in place around 27600 mark as the termination of the counter trend rally that had begun since 18200 levels in March 2020.
Fundamental Outlook:
Dow Jones had dropped by -0.85% yesterday and managed to close around 26395 levels. Dow futures are trading lower for now, around 26330 mark. The SP500 and NASDAQ also closed lower by -0.66% and -1.25% respectively. Asian markets are mixed with Nikkei down -1.20% and Hang Seng almost flat.
Global Indices are expected to remain under pressure amidst rising COVID-19 infections across several states in the US and other countries. China has also reported fresh cases and they have been on the rise. We might witness volatility across DXY, Indices and Gold prices with FOMC rate decision today.
AUDUSD, the risk related currency pair is trading close to its July 22 highs at 0.7183 as we prepare to publish the update. The exchange rate might come under pressure if risk assets selloff. Also, rising COVID-19 infections in Victoria and Australia-China trade relations might fuel the slide.
Technical Analysis:
Dow Jones price action has remained in a tight range since the past 2 trading sessions. A drop below 26200 would certainly confirm that bears are in complete control and ready to push prices lower towards 18200 and beyond, over the next several weeks.
Dow Jones had dropped from 29600 through 18200 in Feb-March 2020, which was an impulse wave. Ideally, an impulse wave is followed by a corrective wave towards the opposite direction. The indice did produce a counter trend rally from 18200 through 27600 levels.
Also note that the counter trend rally had reached up to the fibonacci 0.786 retracement of the previous drop between 29600 and 18200. High probability remains for the indice to stay below 27600 levels, going forward.
Traders might remain inclined to stay short and also look to add further towards 26800/27000 levels. The protective stop would go around 29600 levels while projected targets remain towards 18200 levels going further. Looking lower from here.
Prepared by
Harsh Japee, Technical Analyst.
Dow Jones Chart
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