Dow plunge still not at last gasp levels
Source: www.tradingview.com
Yesterday, FXCM's Dow Jones Industrial Average CFD, the US30, dropped 3.85%. Today, the index is also down pre-cash open. This selldown highlights the inherent risk in the market due to heightened uncertainty. Therefore, be aware of bounces as they might manifest as bear market rallies. In this regard, key resistance levels are of particular importance as short-sellers may target these.
Further to yesterday's article, we note that the H4 stochastic is now under 20 (blue arrow). This weakness is dangerous, as it suggests strong momentum to the downside. If the indicator maintains these levels, the index will be under more selling pressure. In this scenario, the measured move target of 30,000 become more probable.
Bear market rallies build on the hope that the bottom is behind us but collapse as market participants realise the inherent risks are still alive. The catalyst here was the retail results, notably Target's earnings release, which reiterated the current uncertainty in the current market climate. The signal is one of stagflation.
Moreover, this uncertainty is compounded by the Fed. On Tuesday, Jerome Powell reaffirmed the central bank's resolve to bring inflation down to target. But, of note, the Fed Chair admitted that "there could be some pain involved to restoring price stability."
The VIX, which measures the S&P 500's expected volatility, is insightful here. It hasn't pushed the extremes of previous bear markets, generally a reading greater than 40. This level is often the sign of the last stage of capitulation. I.e., there still may be a round of panic selling before we reach risk market lows and value.
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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