The miss in the US CPI report and the better-than-expected US Retail Sales and Jobless Claims last week, gave the Dow Jones enough strength to probe above the key resistance at 35289 and opening the door for the all-time highs. As long as the current soft-landing narrative continues to remain intact and the data doesn’t point to an imminent recession, we should keep seeing the dips being bought and the Dow Jones reaching new highs.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones is probing out of a key resistance level at 35289 and if the buyers manage to sustain the breakout, it will open the door for a rally back to all-time highs. At the moment, giving the FOMC risk on Wednesday, and the profit taking and defensive positioning we’ve been seeing in other markets, we are likely to see a pullback in the Dow Jones as well. That would be a good opportunity for the buyers to buy the dip in case the economic data keeps on leaning towards the soft-landing scenario.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the Dow Jones has been consolidating just above the key resistance since the breakout last Thursday. We have some important confluences here with the red 21 moving average acting as dynamic support and the upward trendline defining the uptrend. Here’s where we are likely to see the buyers stepping in with a defined risk below the trendline to target the all-time highs. The sellers, on the other hand, will want to see the price breaking below the trendline to invalidate the bullish setup and position for a fall into the major trendline.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest rally that led to the breakout is diverging with the MACD. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see the price pulling back to the above-mentioned zone near the trendline where we can also find the 38.2% Fibonacci retracement level for further confluence. A break below this support zone would invalidate the bullish setup and give the sellers control at least until the major trendline near the 34500 level.
Upcoming Events
There will be many important events this week. Today, we will see the US PMIs and we can expect a bearish reaction in case the data misses expectations and a bullish outcome in case the data beats. Moving on to Wednesday, we will have the FOMC rate decision where the Fed is expected to hike by 25 bps. On Thursday, it will be the time for the US Jobless Claims where the market will want to see good data to keep the soft-landing narrative intact while a big miss could ignite some recessionary fears and lead to a selloff. Finally, on Friday, we will have the US PCE and ECI reports.
