Bottom line: Dow Jones long term structure continues to remain bearish against 29600 resistance. The indice might be looking to test 27000/100 levels before reversing lower towards 18200, going forward. Bears are expected to remain in control from here on.
Fundamental Outlook:
Dow Jones has managed to rally over +1.5% this week closing at 26828 yesterday. SPX500 is up over +1.0% while NASDAQ has managed to print new highs around 11119 today, up over +1.5% this week. Equity markets have been on the rise (marginally though) on hopes of another round of stimulus package from the Fed. As we prepare to publish, there is no deal on the next stimulus in the US.
COVID-19 infections remain a threat, though infections are on the decline in the US states of California and Florida. Europe countries are reporting a surge though it may not be as critical yet. US and China tensions continue to rise, with TikTok sale deadline set to September 15.
AUDUSD has managed to recover after dropping towards 0.7076 early this week. The exchange rate had rallied back to 0.7190 before pulling back. AUDUSD might remain under pressure amidst rising COVID-19 infections in Melbourne (Victoria State) and rising US-China tensions.
Technical Analysis:
Dow Jones might be pushing higher towards 27000/100 levels before turning lower again. Ideally, the indice should remain below 27600/700 high that was print in June. Bears should remain poised to push lower towards 18200 levels in the coming weeks.
Dow Jones had produced an impulse drop from 29600 through 18200 in February-March 2020. Ideally, an impulse drop is followed by a corrective rally. Dow Jones produced an impressive counter trend rally between 18200 and 27600 levels respectively.
Also note that the corrective rally had reached up to fibonacci 0.786 retracement of the earlier drop. High probability remains for a bearish reversal and prices should stay below 27700 ideally. Immediate support is just below 25000 and a break lower should be encouraging to bears.
Most traders might continue holding short positions and add further if prices manage to reach 27000 mark. The protective stop should go above 29600 for now, while projected targets point below 23000, 20000 and 18200 respectively.
Harsh Japee, Technical Analyst.
