The current US30 rally looks suspiciously like a dead cat bounce

  • US30

The FXCM Dow Jones Industrial Average CFD, US30, has charted a series of lower peaks followed by lower troughs. This price pattern puts the US30 firmly in a downtrend. As soon as the price dropped below our reference trough (T) on Wednesday, 23 February, the downtrend commenced. As long as the pattern remains unbroken, the US30's trend will be down.

We may ask if the current strength is charting the next lower peak (LP?) in the series? If so, we are in the middle of a dead cat bounce - a rally within a broader downtrend.

Our current measure is at last week's low of 30,131.89 (black horizontal). This yardstick gives a fair gap before considering the next LP to be locked-in. However, the measure will move to this week's low if still in play by week's end ("next expected measure" - red horizontal). Thus, the current market rally, in our view, is regarded as suspicious until proven otherwise.

Russell Shor

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.

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