Earlier today, we highlighted some of the fundamental risks facing equity investors. While we haven’t seen a clear breakdown in the major indices yet, meaning that the trend is still bullish, we can nonetheless map out the key battle grounds and highlight a few levels to watch in the event of a potential breakdown.

Out of the major US indices, the Dow Jones Industrial Average (DJIA) has been underperforming already over the past five days or so due, among other things, to the big falls in shares of Boeing. Therefore, if stocks were to go lower, the Dow might lead on the way down as it is already a weaker index relative to the S&P and Nasdaq.

Overall, the technical picture still looks bullish. However, the index has tested and reacted from the key resistance area in the 25955-26330 region as highlighted on the chart, below.

Over the past three days, the Dow has been testing an intermediate resistance level around 25780 and so far, it has been unable to break above it.
Still, with the index holding its own above the 200-day moving average (which still has a positive slope, objectively telling us that the trend is indeed bullish) and above key support levels such as 25220 (which happens to converge with the 200 MA), the buyers remain in control.

However, if the 25220 support level were to break down in the coming days, only then things might get more interesting and we could see a more significant correction.
 

So, at this stage, the Dow is in neutral territory, meaning it could still go up, as it tests key technical resistance levels and as investors weigh fundamental risks facing the markets. The bears therefore may wish to wait for confirmation before stepping in, while the chasing bulls may wish to proceed with extra care given the sharp year-to-date gains.

Figure 1:

DJIA

Risk Warning Notice Foreign Exchange and CFD trading are high risk and not suitable for everyone. You should carefully consider your investment objectives, level of experience and risk appetite before making a decision to trade with us. Most importantly, do not invest money you cannot afford to lose. There is considerable exposure to risk in any off-exchange transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of the markets that you are trading. Margin and leverage To open a leveraged CFD or forex trade you will need to deposit money with us as margin. Margin is typically a relatively small proportion of the overall contract value. For example a contract trading on leverage of 100:1 will require margin of just 1% of the contract value. This means that a small price movement in the underlying will result in large movement in the value of your trade – this can work in your favour, or result in substantial losses. Your may lose your initial deposit and be required to deposit additional margin in order to maintain your position. If you fail to meet any margin requirement your position will be liquidated and you will be responsible for any resulting losses.

Analysis feed

Latest Forex Analysis

Editors’ Picks

AUD/USD slips below 0.6700 as RBA minutes keep a bearish bias

AUD/USD declines to 0.6700, with the recent low of 0.6697, following the release of RBA minutes during Tuesday’s Asian session. The minutes statement reiterated the policymakers’ readiness to ease the policy if needed.

AUD/USD News

USD/JPY bulls seeking higher-highs on 110 handle

USD/JPY idles at the top of the day's range in holiday thin markets, oscillating around 109.93 having travelled from a low of 109.71 to a high of 109.96.

USD/JPY News

Coronavirus peaking? How will it impact the Chinese & wider economies and FX?

Coronavirus third straight day of a drop in new cases; Financial and commodity markets are in recovery. Markets have been encouraged by the Chinese authorities early response to the outbreak. Disruptions outside China are likely to be limited to parts of Asia.

Read more

WTI: Teases bears below 100-bar EMA

WTI declines to $52.20 during the Asian session on Tuesday. The energy benchmark recently dropped below the short-term ascending support line while extending its weakness below 100-bar EMA.

Oil News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex Majors

Cryptocurrencies

Signatures