Dow Jones Regains Technical Support Levels
The Dow Jones weekly chart shows price held support this past week at the 50% Fibonacci retracement level from the 2020 all-time high to the 2009 low. This represents price giving up 50% of the gains seen from the March 2009 low to the recent all-time high made this year. Price also moved back above the 38.2% Fib level on the weekly chart which puts the trend back in bullish territory as price trading above the 38.2% level indicates an overall bullish trend. With last week’s bounce, price also moved back above the long-term horizontal support line which has acted as price support for the past 11-years. Price also rose back into the broadening wedge pattern after closing below it during the previous trading week. Regaining these levels is bullish from a technical point of view.
While price held support at the 50% retracement level and rose back above the 38.2% level, and regained the long-term trendline and broadening wedge, the week ended with resistance being found at the December 2018 low indicated by the horizontal red line. That is the level to watch going forward this week and is an important horizontal resistance level that needs to be beat in order to prevent a reversal in price back to the downside. Should we see a reversal in price, all eyes will be back on the 50% Fib level for support. A failure to hold there will likely see a decline down to the 61.8% Fib level which corresponds with the lows seen during the 2015 selloff which occurred as the Federal Reserve embarked on a cycle of monetary tightening by raising the Federal Funds Rate.
Traders have their work cut out for them this week as it will be a tightrope walk trying to balance between technical levels of support being regained and deteriorating fundamentals from both a health and economic perspective. Until case counts stop rising, businesses reopen and countries across the globe begin easing travel restrictions, the fundamental outlook will remain bearish.
While price held support at the 50% retracement level and rose back above the 38.2% level, and regained the long-term trendline and broadening wedge, the week ended with resistance being found at the December 2018 low indicated by the horizontal red line. That is the level to watch going forward this week and is an important horizontal resistance level that needs to be beat in order to prevent a reversal in price back to the downside. Should we see a reversal in price, all eyes will be back on the 50% Fib level for support. A failure to hold there will likely see a decline down to the 61.8% Fib level which corresponds with the lows seen during the 2015 selloff which occurred as the Federal Reserve embarked on a cycle of monetary tightening by raising the Federal Funds Rate.
Traders have their work cut out for them this week as it will be a tightrope walk trying to balance between technical levels of support being regained and deteriorating fundamentals from both a health and economic perspective. Until case counts stop rising, businesses reopen and countries across the globe begin easing travel restrictions, the fundamental outlook will remain bearish.