X

Select the account you'd like to open

Analysis

Chart of the week – US 30 may see mean reversion rebound after Black Friday massacre

Chart of the week – Dow Jones Industrial Average (US 30)

US 30 may see mean reversion rebound after Black Friday massacre  

Short-term technical analysis

Time stamped: 28 Nov 2021 at 1:00pm SGT (click to enlarge chart)

Source: CMC Markets

  • The emergence of the new Covid-19 variant, Omicron has triggered an adverse domino effect on risk sensitive assets on last Friday, 26 November; started off with the USD/JPY In early Asian session and spread to the rest of the global benchmark stock indices as well as oil and cryptocurrencies. The main triggers for such a wide scale sell off have been sketchy information about Omicron where several medical experts have warned that it is more transmissible than the Delta variant and may evade vaccine-induced protection and “thin liquidity trading” environment during Thanksgiving holidays that could have exuberated these downside movements.
  • The Dow Jones Industrial Average (US 30) was one of the worst hit among the major US benchmark stock indices where it declined -2.53% on last Friday’s shortened session due to its heavier weightage concentration in cyclical stocks such as Industrials and Financials. The -2.53% drop was its steepest daily loss recorded since 28 Oct 2020.
  • Based on Elliot Wave/fractal analysis, the price actions of Dow Jones Industrial Average (US 30) may have completed its multi-month medium-term uptrend phase; impulsive wave (3) structure from 30 October 2020 low to its current all-time high of 36,564 printed on 8 November 2021. Hence, the US 30 now faces the risk of a multi-week corrective wave (4) decline to occur which is likely to retrace some degree (23.6% to 38.2%) of the prior entire bullish impulsive wave (3) structure.
  • Last Friday, 26 November steep decline seems to have completed or near the process of completion of the first down leg of the potential multi-week corrective wave (4) decline as the steep decline has seen a minor 5 wave sequence (i, ii, iii, iv & v) with Fibonacci retracement and expansion levels that clustered at the 34,500/34,110 zone which confluences closely with the swing low support of 13 October 2021 and the 200-day moving average. Thus, a short-term rebound to retrace a portion of the current steep decline from 8 Nov 2021 high of 36,564 cannot be ruled out at this juncture.
  • In addition, the 4-hour RSI oscillator has declined towards an extreme oversold level of 19% which indicates that last Friday’s decline has been overstretched and may see at least an imminent short-term mean reversion rebound for price actions to revert back to a zone of “statistical normality”.
  • Watch the 34,110 key short-term pivotal support and a break above 35,150 is likely to reinforce a potential short-term mean reversion rebound towards 35,900 resistance before the risk of another corrective decline sequence unfolds to complete the potential down movement corrective wave (4).
  • On the other hand, a 1-hour close below 34,110 invalidates the mean reversion rebound scenario for another round of waterfall slide towards the 33,600/33,300 key medium-term pivotal support zone.

 

 


Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

Sign up for market update emails