Dow Jones Forecast: Waiting to edge lower amid mire of uncertain

Dow Jones dropped as risk-off took the driver’s seat ahead of FOMC meeting.
From a technical perspective, Dow Jones is brewing a Bat Pattern on the weekly chart.
In a shorter term, Dow is struggling to resume uptrend, what key levels to watch?


The recent bank sector woes triggered wild swings in the markets this week. The failure of three American banks and the crisis in Credit Suisse reignited the concerns over banking sectors even the broader financial system.

As the authorities quickly stepped in, the markets did calm for a while. The Dow Jones, S&P 500 and Nasdaq rallied on Thursday. Earlier this week, the Federal Reserve and Swiss National Bank announced to provide liquidities to relevant institutions to avoid an overwhelmed catastrophe, and a group of large U.S banks was reported to rescue troubled First Republic Bank by providing $30 billion lifeline.

However, the market has still been left in huge uncertainty so far as investors are trying to figure out if the latest developments would change the rate hike paths of central banks. With the Federal Reserve interest rate awaiting, many analysts are now expecting a 25 bps rate hike next week.

As a result, heading into the weekend, risk aversion regained control across the markets. At the time of writing, US equity indices retreated significantly from yesterday’s gains as Dow Jones led the way lower.

DOW JONES WEEKLY CHART

Technically, Dow Jones has decisively broken below the neckline of the Double Top Pattern on weekly chart, which usually hints further downside moves ahead. As shown above, the blue chip index may be establishing a huge Bat Pattern, with the ideal D point at 29,962, which is confluent with the 38.2% Fibonacci retreatment of 2020-2022 move, just below the 30,000 handle. As such, the longer term outlook for Dow Jones bias to bearish. The path of least resistance of price may be lower.

DOW JONES DAILY CHART

Zooming in on the daily chart, however, Dow Jones remains in the defined range in recent days, with 32,734 (50% Fibonacci retreatment) and 31,766(38.2% Fibonacci retreatment) as the resistance and support respectively.

The prices have bounced off the lower band for the third time, suggesting the strength of support there. The RSI indicator turned lower below the neutral level, which can sometimes precede bearish momentum.

The immediate resistance looks to the upper band 32,734, a break from upside may open the door to the prior highs of 33,000 and 33.590.

On the flip side, the initial support looks to the lower band 31,766. A break below would guide the price back to the broader downtrend.