Error in US CPI report and better than expected US retail sales and Unemployment claims last week the Dow Jones gave enough strength to probe the key resistance at 35289 and open the door for all-time highs. As long as the current soft landing narrative remains intact and the data does not point to an impending recession, we should continue to see the dips being bought and the Dow Jones making new highs.
Dow Jones Technical Analysis – Daily Time Frame
Dow Jones Daily
On the daily chart, we can see that the Dow Jones is probing a key resistance level at 35289 and if buyers manage to hold the breakout, it will open the door for a recovery back to all-time highs. At this point, given Wednesday’s FOMC risk and the profit-taking and defensive positions we’ve seen in other markets, we’re likely to see a decline in the Dow Jones as well. This would be a good opportunity for buyers to buy the dip if the economic data continues to lean towards a soft landing scenario.
Dow Jones Technical Analysis – 4 Hour Time Frame
Dow Jones 4 hours
On the 4-hour chart, we can see that the Dow Jones has been consolidating just above key resistance since last Thursday’s breakout. We have some important confluences here with the red moving average of 21 acting as dynamic support and the ascending trendline defining the uptrend. Here we are likely to see buyers enter with defined risk below the trendline to target all-time highs. Sellers, on the other hand, will want to see the price break below the trendline to invalidate the bullish setup and position to fall into the main trendline.
Dow Jones Technical Analysis – 1 Hour Time Frame
Dow Jones 1 hour
On the 1 hour chart we can see that the last rally that led to the breakout is diverging with MACD. This is generally a sign of fading momentum, often followed by pullbacks or reversals. In this case, we could see the price pull back to the aforementioned zone near the trend line, where we also find the 38.2% Fibonacci retracement level for the next confluence. A break below this support zone would invalidate the bullish setup and give sellers a check to at least the major trendline near the 34500 level.
Upcoming events
Many important events will take place this week. Today we will see the US PMI and we can expect a bearish reaction if the data misses expectations and a bullish result if the data beats. Moving on to Wednesday, we will have the FOMC rate decision where the Fed is expected to hike 25 bps. Thursday will be time for US Jobless Claims, where the market will want to see good data to keep the soft landing story intact, while a big miss could fuel some recession fears and lead to a sell-off. Finally on Friday we will have the US PCE and ECI reports.