Dow Jones 1W - 28,500 Incoming? CPI BULL-TRAP

The Dow Jones' recent weekly close displays a significant wick to the downside after finding a new local high which was most likely caused by a mini cascade of stop losses being triggered alongside liquidation events from short traders since the local bottom of 28,500.

The recent volatility in price swings suggests the market may have found the liquidity it requires for a reversal back down, taking from both confused and indecisive long and short traders on quick price reversals trapping traders in both directions.


BULL-TRAP LED BY CPI FORECAST
The recent break out of its long term downward sloping resistance seems a mere bull-trap in search of liquidity.

The obvious signs were the MoM CPI forecasted 20% higher than the previous month in November despite all the soul crushing the Fed have been inflicting on borrowers the past couple of years to achieve its 2% inflation target.

With the actual print coming in 80% lower than the previous month was all it took to lure the hungry bulls into the slaughterhouse, who were all hoping to take home a free Turkey or two to enjoy this Christmas.

But instead, it was the classic case of buy the rumour and sell the news. It's becoming evidently clear with the input of more
fundamentals that this is almost always the case. It makes more sense when you realise that the price of publicly traded assets such as stocks is what the market forecasts its value to be at a particular future date.

CONTIUATION OF TREND REVERSAL
The continued sell off in the futures market sees the price now dancing atop the downward sloping roof which is naturally very slippery due to its descending angle.

The now slippery support acted as the previous resistance since its ATH in Nov '21 which it only recently broke through. Unless it grows a new pair of wings to take off again, back into the abyss, it faces a high probability of slipping and falling off this downward slanted roof.

CONCLUSION
If the market fails to grow a new pair of wings before the end of 2022, there's a good probability we reach a new local low once the current slippery support is broken.

From the many hours spent on observing how the price of Dow Jones behaves, my intuition suggests a new local low will be at 28,500. Not because it's a convenient number but it happens to coincide with the 50% Fibonacci retracement level measured from the March 2020 Covid low to the end of last year's epic bull run.

WORSE CASE SCENARIO - 22,000 (85% Fibs)
MODERATE CASE SCENARIO - 28,500 (50% Fibs)
BEST CASE SCENARIO - Bulls become Moon Boys 🌙 (-3618%)
ETA - Jan/Feb '23