Bottom line: Dow Jones long term structure continues to remain bearish against 29600 mark. The indice is holding well below its recent swing highs around 27700 levels and bears might be poised to resume lower towards 18200 levels.

 Fundamental Outlook:

Dow Jones rose only marginally higher (+0.39%) to close at 26842 yesterday. The indice has lagged behind SPX500 which has surged through 3281, above its June 09 high. Hang Seng and Nikkei trade lower by -0.40% as we prepare to publish the update.

Risk appetite and Global Indices might be facing a major selloff as Geo-political tensions keep rising. UK seems to have joined the list against China off late. The country might ban Chinese Telecom provider Huawei, as confirmed by UK Prime Minister Boris Johnson.

EU summit was successful in drawing a EURO 750 billion stimulus package over the COVID-19 pandemic, yesterday. This has helped EURO to rise through 1.1500 mark, against the US Dollar yesterday. It remains to be seen if risk assets can continue their dominance over USD.

AUDUSD also managed to hit fresh highs around 0.7152 as we prepare to publish today’s updates. The risk related currency pair rose alongside Global Indices. It might come under renewed selling pressure as traders might be looking to take profits. It might be good to keep an eye of Global Equity markets as well.

Technical Analysis:

Dow Jones has been holding well below its June 09, 2020 highs around 27700 levels. Unlike SPX500, which has print yet another high around 3280 yesterday, the indices has remained subdued indicating a potential bearish divergence. Bears remain poised to take control from here.

Dow Jones drop from 29600 through 18200 was an impulse wave. Ideally, an impulse wave is followed by a corrective wave in the opposite direction. The indice had rallied from 18200 through 27700 as a corrective zigzag , A-B-C.

Dow Jones had rallied up to the fibonacci 0.786 retracement of the earlier drop, before reversing lower again. Immediate resistance remains at 27700, followed by 29600, while support is seen around 23000 levels respectively. A drop below 23000 will confirm that a meaningful top is in place around 27700.

Most traders might remain poised to hold short positions, with protective stops around 29600 levels. The projected targets point towards 18200 levels in the next several weeks to come. Only a break above 29600, would change the bearish structure.

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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