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Chart of the week – reality check for Dow Jones bulls

wall street

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

Short-term technical analysis (1 to 3 weeks)

(click to enlarge chart)

Time-stamped: 21 August 2022 at 12:30pm (SGT)

Source: CMC Markets

  • The recent two-month rally of 16% seen in the US 30 Index (a proxy for the Dow Jones Industrial Average) from its 52-week low of 29,649 printed on 17 June 2022 to its recent high of 34,285 on 16 August 2022 has run into a roadblock coupled with the emergence of several bearish elements from a technical analysis perspective.
  • Hence, exhaustion and fatigue may be around the corner for the bulls. Bearish bias below 34,600 key medium-term pivotal resistance for a potential drop towards the following supports at 33,300 and 32,580.
  • On the flip side, a clearance with a 4-hour close above 34,600 put the bearish tone on hold for a squeeze up towards the next resistance at 35,230/380 (29 March/21 April 2022 swing highs & 76.4% Fibonacci retracement of the last major downtrend phase from 5 January 2022 all-time high to 17 June 2022 low).  
  • Negative elements; last Friday’s price actions ended with a weekly bearish “Gravestone Doji” reversal candlestick pattern after a failure to close above the 50-week moving average that has capped previous rallies since April 2022, Elliot Wave/fractal analysis has indicated that the two-month rally has reached an inflection zone of 34,300/600 which increases the odds of a bearish reversal, short-term downside momentum has resurfaced from the negative observations seen in the 4-hour RSI oscillator as it has flashed a prior bearish divergence signal at its overbought region coupled with a recent bearish breakdown from its corresponding support at the 50% level.
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