The hourly FXCM CFD for the Dow Jones Industrial Average (US30) contends with the overhead resistance confluence. The index is near 33,025, with the central pivot (P) overlapping price resistance (red shaded horizontal). The hourly trend following indicators have crossed positive (black ellipse), and the stochastic is making its way towards the 80+ areas (blue arrow). If the stochastic can maintain the upper quintile, an underlying bullish momentum may help lift the index.
The left-hand chart below shows the US30 weekly timeframe. Here we note that a lower peak followed by a lower trough has charted. This pattern is the definition of a downtrend. Considering this is a weekly chart and reflects the primary trend, we think this to be a bear market until proven otherwise. In this regard, we are keeping an eye on the weekly stochastic. If it drops into the 20- levels (green rectangle) and oscillates around these levels, the odds shorten for further weakness.
The chart on the right is the US30 daily. The index has support around the 32,500 level (green shaded horizontal). Moreover, the stochastic is above the weak 20- levels. If it can turn up and head towards the upper quintile (blue arrow), bullish market participants may be using the support level as a platform to buy into the decline. The question is if the index at current levels represents value or not? The weekly chart is a downtrend, so picking the low is dangerous. Therefore, resistance levels above price should be monitored for reactions, as the shorts may target these.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.