Bottom line:  Dow Jones bearish structure is now expected to remain intact until prices stay below 29587 levels. Expect a pullback rally towards 29000 levels before resuming lower again.

Technical Analysis:

Dow Jones finally reversed sharply from sub 29500 levels last week, as we have been bringing up and discussing since last several weeks. The structure looks to be now complete with a meaningful high in place at 29587 levels. Please also note that initial support at 28166 has also been taken out as bears register themselves to push further from here. The drop from 29587 through sub 28000 seems to be an impulse, and could be labelled as Wave 1 or A of a much larger correction lower. If the above is correct, please be prepared for a Wave 2 termination higher from here towards the 29000 region, before Dow Jones resumes lower again. Also note that backside of the immediate line of support is seen through sub 29000 levels, which could act as resistance for any counter trend rallies. Most traders who initiated aggressive shorts from 29000/500 levels might be willing to take profits around current price action and remain flat as the counter trend rally unfolds. An aggressive trader might be looking to initiate longs with stop lost at 27800, and projected target towards 29000 respectively. Looking at the larger degree wave counts, Dow Jones might have terminated an A-B-C rally that had begun since 21685 lows in December 2018. Wave B was a triangle structure and Wave C finally might have terminated at 29587 levels. If the above holds true, Dow Jones is expected to stay below 29587 levels going forward and continue dropping lower towards 21000 levels in the long term. Alternately the recent drop could be an expanded flat lower degree wave iv within Wave C. In that case, we should witness another high above 29587 before a bearish reversal.

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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