Dow Jones Industrial Average - Technical Analysis

Coming up with a trading plan on the DOW is more difficult than on the Russell 2000. We have three significant  resistance levels above the current price point. And we have support which is the recent lows a few weeks ago.

Five trading days ago the DOW tested resistance around 12750 and has failed to break upwards. Over the past 5 days the DOW has pulled back to approximately the 50% Fibanocci point (as measured from 11645 to 12750). At this time the DOW is sitting right at a point where it can go either way so taking a position at this juncture is not prudent. And with three resistance levels above the current price point it will be difficult to gauge a good time to go short on the DOW. From my experience I would say that any rally will likely be stopped at the resistance level identified by the green line (12550). If we experience a rally I will be watching closely to see if the rally stops at that resistance point, and if so I will go short by buying the UltraShort symbol: DXD. We can expect to see at a minimum a re-test of the lows from mid January if the DOW fails to break the resistance I just spoke of.

There is still great potential for the DOW to eventually fall below support (11645) and go much lower. But as we all know, news is having huge impacts on the markets so panic or jubilation will likely have a very dramatic effect on the DOW… and if panic sets in then technical’s take a back seat temporarily. This is a tough market currently, the transition from a bull market to a bear market is always marked with extreme volatility.

Going long on the DXD is an inverse gain ETF, for when the DOW Industrials declines in price the DXD pays a 2x gain.