Bottom line:  Dow Jones long term bearish structure remains intact until prices trade below 29600 levels. The indice is facing resistance around 24000 levels and a bearish reversal here could bring back bears into play.

Fundamental Outlook:

Dow Jones continued its rally yesterday and closed 2.50% higher around 24026 levels alongside SPX500. The continued rally across major indices has been backed by the declining curve of COVID-19 pandemic. Also, additional stimulus package from the Fed has helped offsetting the effects of a major declining job market in the U.S.

Meanwhile the IMF predicts that both developed and emerging market economies shall face recession. It is believed that the ongoing COVID-19 pandemic is the worst since The 1929 Great Depression. Global equity markets may resume lower again as relief rallies are set to halt soon.

Oil prices declined by over 7.5% yesterday and closed below the 21.00 mark since March 31, 2020. The agreement between OPEC members to cut production by 10 million barrels per day over the next two months have failed to curb the drop. Possibilities of a price war is ruled out for now and this could be a positive for Oil.

Meanwhile U.S tops the list of the highest affected from COVID-19 crisis as numbers cross over 6 million. Around 325 new case were registered with 17 fresh casualties.

Technical Analysis:

Dow Jones bulls have managed to push higher towards 24000 levels yesterday. If this barrier is taken out, it would open doors for a test of 25300 before giving in to bears. A break below 20650 is required to confirm a meaningful top in place.

Dow Jones has rallied up to the fibonacci 50% of earlier decline between 29600 and 18200 levels. A bearish reversal remains possible around current levels or from 25300 zone. Resistance remains around the 27000 mark, the March 03, 2020 highs.

Most traders might be preparing to initiate fresh short positions between 23900 and 25000 with protective stop above 29600 and targeting below 18200, going forward. 

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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