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
Dow Jones Daily
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
Dow Jones 4 hour
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
Dow Jones 1 hour
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.
Upcoming Events
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.