Dow Jones Technical Analysis

December 4, 2023 1:59 pm

Last Friday, the Dow Jones rallied despite the ISM Manufacturing PMI missing
expectations and falling further into contraction. The market is still trading
based on rate cuts expectations as the trigger for the rally was a neutral Fed Chair Powell speech
where he didn’t push back against the market’s pricing. The market seems to be
all-in on the soft-landing trade and ignoring the weakening economic data,
especially on the labour market side. The sentiment is also getting a bit bubbly
right when things might really go south, so the buyers might want to be extra
cautious going forward.

Dow Jones Technical
Analysis – Daily Timeframe

Dow Jones Daily

On the daily chart, we can see that the Dow Jones broke
decisively through the cycle high and extended the rally into the 36265 level.
This looks more and more like a FOMO play with the index distant just 2% from
the all-time high. The market is not even offering decent pullbacks with the
price just going up parabolically. These are not healthy trends, especially in
this part of the cycle.

Dow Jones Technical
Analysis – 4 hour Timeframe

Dow Jones 4 hour

On the 4 hour chart, we can see that
the price is overstretched to the upside as depicted by the price distance from
the blue 8 moving average. In
such instances, we can generally see a pullback into the moving average or some
consolidation before the next move. This would fit with a pullback into the
recently broken cycle high at 35684 where the buyers might pile in with a
defined risk below the level to position for another rally and target the
all-time high.

Dow Jones Technical
Analysis – 1 hour Timeframe

Dow Jones 1 hour

On the 1 hour chart, we can see that the
breakout to the upside of the channel and the cycle high triggered a strong
increase in the bullish momentum with the buyers piling in aggressively to
target the all-time high. From a risk management perspective, buying around
these levels doesn’t make much sense from both a fundamental and technical
point of view, so waiting for a decent pullback should be better than chasing
this insane rally.

Upcoming Events

This week we will see lots of US labour
market data culminating with the NFP release on Friday. Tomorrow, we have the
ISM Services PMI and the US Job Openings reports. On Wednesday, we will get the
US ADP data. On Thursday, it will be the time for the US Jobless Claims
figures, while on Friday we conclude the week with the NFP report.

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