Bottom line:  Dow Jones needs to break below 28169 support to confirm that a meaningful top is in place at 29415.

Technical Analysis:

Dow Jones bulls continue to defy any resistance and continue rally towards the 29400/500 highs yesterday. Believe it or not, each new high is accompanied with a strong bearish divergence on the daily RSI shown here. The Dow Jones indice print yet another high but RSI fails, in fact it trades below 60 indicating strong bearish divergence. Looking at the overall wave structure since December 2018 lows at 21700 levels, Dow Jones seems to have already completed an A-B-C rally. Wave A terminated around the 26696 mark, while Wave B had taken shape of a triangle terminating at 25743 levels respectively. Since then, Wave C has been underway unfolding into 5 waves that looks to be complete. The fibonacci 0.618 extension was already hit at 28865 levels earlier, and Dow Jones has print much higher around 29400/500. With price action still not confirming 5 waves down and a major support break, conservative traders might be willing to remain flat for now. Initiating long positions now could prove to be a possible bull trap. It might be suggested to allow Dow Jones to break below 28169 support to confirm bearish reversal ahead. Aggressive traders might be looking to enter short positions since recent rallies have been accompanied by strong bearish divergence. It could be advisable to let 5 waves drop complete on a short time frame before entering aggressive short positions. We shall confirm a potential impulse drop from 29400/500 highs, which could be taken as a potential risk trade. Looking at the recent wave structure, the key remains at 28169 support and it could be considered safe to remain flat until Dow Jones break lower.

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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