DOW JONES Technical Analysis | Forexlive
Following the more hawkish than
expected FOMC meeting, the market sold off going into the Christmas holidays, including the Dow Jones. The
lower volume and news flow during the holidays led to a rangebound market.
The risks now are a deep recession coupled with a possible overtightening from
the Fed.
These risks keep the bearish bias
intact. The China
reopening news during the holidays also could lead to more
inflationary pressures, which may force the Fed to go higher than their
projected terminal rate of 5.1%.
In the daily chart above, we can
see how the market was trading in a rising channel before it failed to break
the 35400 resistance and then broke down as the
Fed reiterated their hawkish stance. The price action in the channel was diverging with the RSI signalling a loss of momentum.
Generally, the target is the
bottom of the channel, which in this case comes at 31761. Right now, the price is stuck
in a range trying to break the resistance zone in the 33650 area. That
should be the level dividing the bearish from the bullish bias in the short
term.
Buyers will need to break that
zone to further target the 35400 resistance. Failure to do so, will keep
sellers in control and target the 31761 level, with a further continuation to
the downside in case of a break down.
In the 1-hour chart above, we can
see more closely the rangebound price action. The resistance comes at 33615 and
the support at 32990. In such instances,
it’s better to stay out of the market and wait for a clear breakout. But
one can also play the range and sell at resistance or buy at support depending
on your personal bias.
Zooming in to the 15 minutes
chart, we can see there’s a divergence between the price and the RSI. That should point to a pullback
in the near term. The level that should define the next move should be the
support at 33322. This opens up to two possible scenarios:
·
The price bounces from the level and runs to
the upside targeting the 33615 resistance.
·
The price breaks the level and falls further to
the 32990 support.