Bottom line: Dow Jones long term structure continues to remain bearish against 29600 resistance. The indice might have carved a lower high around 27600/700 around June 09, 2020, which is holding well. Bears might be preparing to resume lower towards 18200, going forward.
Fundamental Outlook:
Dow Jones futures managed to rally towards 26400 mark during early hours yesterday. This was quickly revered and the indices closed lower by -1.43% at 25864. SPX500 also followed suit, and managed to close -1.04% lower, at 3146. NASDAQ hit yet another high at 10700 before closing lower.
Indices in the US continue to diverge, and this could be a potential warning. Further with steady rise of COVID-19 in the United States, risk assets have also surprisingly rallied. These might be early signs of a potential risk aversion ahead. Investors should remain mindful.
AUDUSD had come under pressure after hitting highs at 0.6997 yesterday. The Reserve Bank of Australia kept interest rate unchanged at 0.25%. Low interest regime may stay for a while, it was hinted. On the other hand, state of Victoria plans a lock down as COVID-19 infections rise.
Technical Analysis:
Dow Jones is looking to resume lower as bears tighten their grip after hitting 26400 levels early this week. The indice has been holding well below its June 09 highs at 27600/700 and is expected to push towards 18200 levels over the long run.
Dow Jones had dropped from 29600 through 18200 in an impulse wave. An impulse is usually followed by a corrective wave in the opposite direction. The indice has managed to produce a corrective rally from 18200 through 27600/700 levels.
Also note the counter trend rally had managed to reach the fibonacci 0.786 retracement of the earlier drop between 29600 and 18200 respectively. Ideally, Dow Jones should stay below 27700 interim resistance and continue lower.
Most traders might be inclined to initiate fresh short positions around 26000 mark, with a protective stop above 29600 for now. The projected long term target might be below 18200 levels. Bears might be expected to remain in control from here.
Prepared by
Harsh Japee, Technical Analyst.
Dow Jones Chart
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