Bottom line: Dow Jones long term structure continues to remain bearish against 29600 resistance. The indices seems to have carved a lower high yesterday just above 28000 mark and reversed sharply lower. Bears might be back in control going forward.
Fundamental Outlook:
Dow Jones had peaked towards 28160 yesterday before reversing sharply. The indice had managed to close flat around 27760 levels. SPX500 and NASDAQ also closed in the red down -0.50% and -1.50% respectively. Indices might face further selloff as Mr Biden announces Kamala Harris as his Vice President pick.
AUDUSD has been under pressure after hitting highs around 0.7250 mark last week. The exchange rate might face further pressure, if risk assets continue their selloff. Global equity markets remain vulnerable to another round of bearish wave as demand for safe haven US Dollar might be back. Furthermore, Gold has dropped below the $1900 mark, which might be US Dollar bullish, as we prepare to publish.
Technical Analysis:
Dow Jones might have carved a meaningful lower top around 28160 mark yesterday before reversing lower again. The indice might be looking to turn lower towards 18200 levels over the next several weeks, as bears are looking poised to take control back.
Dow Jones had dropped between 29600 and 18200 levels as an impulse wave. An impulse wave consists of 5 sub waves and is normally followed by a 3 wave corrective structure. In this this Dow Jones has produced a corrective wave (rally) from 18200 through 28160 levels respectively.
Also note the corrective rally has just tested its last fibonacci 0.88 retracement levels around 28100/200 zone. High probability remains for a bearish reversal from here as the indice is also accompanied by a shooting star candlestick pattern on the daily chart.
Dow Jones recent rally has also been accompanied by a bearish divergence on the RSI as seen here. Most traders might be preparing to initiate fresh short positions with protective stops above 29600 and projected targets below 18200, going forward.
Prepared by
Harsh Japee, Technical Analyst.
Dow Jones Chart
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