Bottom line:  Dow Jones should remain bearish with 29600 levels intact but a counter trend rally towards 27800 cannot be ruled out from current levels.

Technical Analysis:

Dow Jones remains firmly in control of bears since printing highs at 29600 level earlier. Looking at the immediate short term counts since 29600 levels, the indice seems to have carved an impulse wave towards 24695. This could be labelled as Wave 1 within a potential 5 waves drop or Wave A within a corrective A-B-C drop. In either case, Dow Jones is expected to drop towards 21660 levels at least. At this point in time, the first wave looks to be complete and a counter trend rally could be seen as most probable move. Most traders might be willing to take profits on the short positions taken earlier around 25800-26000 levels and remain flat. An aggressive trade strategy might be to initiate long positions with stop below 24695 and projected target as 27800 respectively. Please note that counter trends are tricky to trade and can take time to unfold. Furthermore, they might terminate prior to our projected targets at 27800 levels. Hence one should remain cautious while going counter trend. Looking at the overall wave structure at a lager degree, Dow Jones had rallied in an A-B-C since 21685 lows in December 2018. Wave A was an impulse, while B had unfolded as a triangle, followed by Wave C that terminated at 29600 levels respectively. The recent drop could be a part of a larger corrective wave structure and potentially drag prices lower towards 21600 levels at least. It remains to be seen how long it takes for the counter trend rally to materialize towards 27800 to terminate Wave 2 or B. Another sharp decline could be expected when Wave 3 or C resumes lower.

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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