Bottom line: Dow Jones long term structure remains bearish until prices stay below 29600 resistance. In the short term, bulls are looking poised to push towards 25200/300 levels before reversing lower again. Watch out for a sharp bearish reversal from 25200 zone.

Fundamental Outlook:

Dow Jones, alongside the SPX500 had closed lower by around -1/5% yesterday, after news came in regarding the COVID-19 vaccine, stating the study is yet not enough to draw any conclusions. This is a classic example of how fragile and sentiment drive are equity markets, post COVID-19.

Fears still loom for a potential second wave of COVID-19 infections as US, Europe and Asian economies re-open after several weeks of lock down. Furthermore, the economic damage would require more efforts from Central Banks and is going to take a while to recover. Fed is already prepared to do what it takes to help the economy, hints Jerome Powell.

AUDUSD, driven by risk-sentiment also managed to rally since beginning of this week and had managed to register highs at 0.6585. This was backed by the Reserve Bank of Australia ruling out possibility of any additional measures required for now, expecting recovery in the latter half of 2020.

Technical Analysis:

Dow Jones remains in control of bulls since Monday and had managed to rally over 1000 points in the last two trading sessions. Technically, the recent rally is seen as the last leg within the counter trend rally that had begun since 18200 levels. It would be grave to take this rally as a resumption of an uptrend.

Dow Jones had earlier dropped from 29600 through 18200 as an impulse wave. The rally since 18200 is merely a corrective retracement of the previous drop. Also note that Dow Jones will be soon approaching fibonacci 0.618 retracement of the earlier drop, around 25200 zone. High probability remains for a bearish reversal from there towards 18200 and below.

Traders might be preparing to initiate fresh short positions around 25200/300 zone, with stop above 27200 and projected target below the 18200 mark. Let us prepare for another round of sell off in the indice, going forward.

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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