Dow Jones Technical Analysis
The market has been trading on a
risk on mood in the past few weeks taking bad news as good news, with the Dow Jones benefiting.
The beat in the NFP and the miss in the ISM
Services PMI reports sparked a rally that managed to break out
of the Christmas holidays range. Moreover, the lack of comments on monetary
policy or recent set of economic data from Fed
Chair Powell gave the market the confidence to keep on reaching
new highs.
Yesterday though, the Retail
Sales data showed a big miss to expectations and the
previous numbers were revised downward. The still high inflation,
rising interest rates and recession fears are all big headwinds for the
consumer and this is starting to be clearer by the day. The market sold off
after the news and even fell back into the Christmas range. Maybe, the bad
news is indeed bad news now?
In the daily chart above, we can
see how the market broke out of the Christmas range and the resistance zone at 33450-33650 and kept on
rallying to new highs. The lack of additional catalysts and weakening momentum
to the upside started to weigh on price action.
Eventually, the big miss in
retail sales report pushed the market lower and the price is now back again
below the previous broken resistance. If the bearish sentiment continues,
the targets will be the support level at 31761 and the October
low at 28650.
In the 1-hour chart above, we
can see all the recent major catalysts that sparked the rally and the breakout
of the resistance zone. As the momentum to the upside
started to dwindle the market pulled back a bit waiting for another catalyst. But
the big miss in retail sales data made the market to sell off and return back
into the previous range.
Zooming in to the 15 minutes
chart, we can see that at the moment the selling momentum is getting exhausted
as depicted by the falling
broadening wedge pattern and the price divergence with the RSI indicator.
We should see a pullback into the
resistance area at 33450-33650 before looking for a continuation to the
downside.
Alternatively, the market may again break to the upside and restart the bullish
trend. This might happen if jobless claims beat again expectations.