Yesterday, the US ISM Services PMI beat expectations by a big margin and caused a selloff in the Dow Jones. The market pricing for future interest rates expectations turned a little bit more hawkish with basically a 50/50 chance of another hike in November and less rates cuts in 2024. Last week we got a “bad news is good news” type of reaction, while yesterday it was the complete opposite as “good news was bad news”. It looks like the market is still trading on interest rates expectations.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones rallied all the way back to the support turned resistance around the 35000 level and sold off as the sellers piled in there targeting a fall into the 33805 level. The bias remains bearish as the moving averages are still crossed to the downside.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the Dow Jones tapped almost perfectly into the 61.8% Fibonacci retracement level before dropping, and then extended the selloff as the moving averages crossed to the downside confirming the bearish sentiment. We might get a pullback now as the price is hovering around the previous lows that should act as support.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a nice bearish setup here. In fact, from a risk management perspective, the sellers would be better off waiting for a pullback into the support turned resistance around the 34700 level where we have also the confluence with the 61.8% Fibonacci retracement level, the trendline and the 4-hour red 21 moving average.
This is where the sellers should pile in with a defined risk above the trendline to target the 33805 level. The buyers, on the other hand, will want to see the price breaking above the trendline to invalidate the bearish setup and position for a rally into the highs.
Today we will have the last important US economic data for this week: the US Jobless Claims report. We saw just yesterday that the market doesn’t like strong US data as that raises the chances that the Fed might need to do more and eventually lead to a worse recession. So, if we get good data, we should see more weakness in the Dow Jones, while bad data should provide a relief rally. At some point though, the market should start to worry about bad data as well.