Bottom line:  Dow Jones bearish structure should remain intact until prices stay below 29373. Bears might be preparing to break below the 4 month trend line support.

Technical Analysis:

Dow Jones bears are back in control as the indices reversed sharply from 29373 highs early last week. The indice had dropped close to initial support at 28400 levels yesterday before pulling back. Looking at the short term wave structure, Dow Jones has dropped in 3 waves between 29373 and 28400. Yesterday’s pullback towards 28820 levels was corrective and could be labelled as a lower degree wave iv from the top.  If the above counts are correct, Dow Jones could be on its way to print yet another low towards 28200 levels from here. This would complete a 5 wave drop from 29373 and confirm a much larger drop going forward. If aggressive short positions were taken earlier, one can choose to take profits or bring stop loss to breakeven levels and wait for yet another low towards 28200. Once the first impulse drop is in place, a corrective rally should resume higher towards 28900/29000 levels. This could be taken as another opportunity to build short positions against 29400 with projected target as 26900. Alternately, if prices manage to rally towards 29200 without printing another low, bulls might attempt another shot at 29400 and higher. At the moment, probabilities remain high for another drop to 28200 and complete a bearish impulse. Opportunities are there on both sides if waves unfold as projected above. Looking at the larger wave structure, Dow Jones might have terminated a larger degree A-B-C rally since December 2018 lows around 21792 levels. This could be a part of a larger degree expanded flat and prices could drop all the way towards 22000 levels.

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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