On the daily chart below, we can see that the Dow Jones has bounced from the key 32684 support as positive news on the debt ceiling deal lifted the sentiment last Friday going into the weekend. The market positioned for a possible deal over the weekend and sure enough, Biden and McCarthy announced a deal yesterday.
The Dow Jones opened with a positive gap in electronic trading hours that soon after got closed. We may now see a classic “sell the fact” trade where the market trades into an expected outcome and then reverses when the outcome is confirmed. The red 21 period moving average will be the one to watch as the sellers lately leant on that to position for more downside.
Dow Jones Technical Analysis
On the 4 hour chart below, we can see that as we expected last Friday, the Dow Jones bounced from the 32684 support. The long candlesticks wicks on the support were giving a clue that the buying pressure was high there. The rally broke above the 33000 resistance and hit today the next 33300 resistance.
From here, we should see a pullback and then another push into the 33800 level in case the “sell the fact” trade is invalidated. On the other hand, if we do get the “sell the fact” scenario, the Dow Jones should fall from here back to the 32684 level and possibly stretch beyond that.
In the 1 hour chart below, we can see that the buyers will have the confluence of the 38.2% Fibonacci retracement level and the red 21 period moving average near the 33000 resistance turned support. This will be a key buying zone with a limited risk just below it. The sellers, on the other hand, will want to see the Dow Jones to break below that zone to pile in for a bigger fall into the 32684 support.
