Bottom line:  Dow Jones might have print interim lows around 18200 levels. The current pullback rally should face resistance around 21600.

Technical Analysis:

Dow Jones might have completed Wave 3 around 18200 levels, slightly below the 19000 mark as discussed earlier. The pullback rally was expected and much awaited but it is only to be taken as corrective. The wave counts since 29600 levels are pretty clear as Wave 1 terminated around 24695, Wave 2 was sharp and terminated at 27095 respectively. Wave 3 could be seen as an extension and sub dividing into lower degree 5 waves, terminating around 18200 levels last week. If the above counts are correct, a potential Wave 4 could be underway and might extend towards 21600 levels at least. Please note the fibonacci 0.382 retracement is seen at 21600, which is a common relationship for Wave 4 to terminate. At the moment, Dow Jones is seen to be hitting a channel resistance and potential remains that Wave 4 terminated a bit earlier than expected. Also note that Wave 4 might unfold as a triangle and take more time, since Wave 2 was sharp. Alternately, we could witness a sharp rally towards 23700 levels or even higher levels. In that case, the wave counts shall be re-adjusted to Wave 3 still in progress and a potential 3^rd of 3^rd wave might be underway from 23700/24000 levels respectively. Traders might be willing to stay aside for now and allow price action to unfold before committing fresh short positions. Ideal levels might be 21600 resistance or from 23700/24000 levels respectively. It the former counts presented here are correct, Wave 4 termination might be seen close to 21600 and Dow Jones might be hearing towards 17000 and lower to terminate Wave 5 and complete the first impulse wave from 29600 levels.

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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