Bottom line: Dow Jones long term structure continues to remain bearish against 29600 resistance. Furthermore, the indice has now carved a lower high at 27600/700 levels over the last week before reversing sharply lower.

Fundamental Outlook:

Dow Jones had dropped close to 6% over the last week, closing in at 25540 mark. Other Global Indices also followed lower as risk sentiment reversed sharply, NASDAQ being the only exception. Talks over further stimulus measures, has boosted risk assets over the last 2 trading sessions, as Global Indices recover over 50%.

Believe it or not, this is a classic example of how fragile investor psychology remains. Nothing has changed with respect to the looming Global Recession and re-surging second wave of COVID-19 infections. It is just a matter of time for potential reversal across Global Indices, going further.

AUDUSD, the risk-related currency also dropped from its peak 0.7064 since June 10, 2020. The bounce early this week looks temporary as COVID-19 infections erupt. The currency exchange rate shall also be taking cues from the Employment data to be out tomorrow. Over 125K job losses are expected in May and Unemployment Rate climbing to 7%.

Technical Analysis:

Dow Jones seems to have carved a lower top around 27600/700 levels over the last week. The indice has reversed sharply lower since then and might have resumed its down trend. Bears are back with vengeance and are expected to remain in control from here on. Looking lower towards 18200 now.

Structurally, Dow Jones had dropped between 29600 and 18200 levels as an impulse. The subsequent rally towards 27600/700 mark was in 3 waves, hence corrective. The counter trend rally found resistance right above the fibonacci 0.786 retracement of earlier drop.

Dow Jones is again testing intermediary resistance around 26300//400 levels as we write this article. Traders might be preparing to initiate fresh short positions here, with protective stop above 29600 and projected target below 18200 respectively.

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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