Top Story

The Dow Breaks Out Of Compression

Having conquered the November high with yesterday’s breakout, the Dow looks up to its record highs with little in the way of technical resistance.

Since its V-bottom, the index rallied over 20% since the December low in an almost straight line. Whilst the index spent a month coiling within a symmetrical triangle, an elongated bullish engulfing candle provided a prominent low, where its failure to test the 23.6% Fibonacci retracement level provided another sign of strength for the trend.

An upside breakaway gap confirmed the symmetrical triangle on Monday, in line dominant momentum. That we saw two days of compression prior to yesterday’s breakout (instead of retracing) further shows the dominance of the bull-camp, and we’re now look for the November highs to hold as support.

If successful, the triangle projects and approximate target just above record highs. That said, the zone around 26,800 – 26,950 could serve as a conservative target, as we’d expect a price reaction around such an important level such as all-time highs.

Trade optimism and a global PMI data is supportive of sentiment and, therefore, the stock markets. However, a positive NFP report could another leg-up for the index and, of course USD (note that DXY is testing key resistance ahead of the report). If sentiment is to turn, a close below the November highs could warn of a bull-trap, although the trend would remain structurally bullish above 25,200. And we’d also have the gap between 25,950-26,075 to provide the potential for support along the way.  


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

Open an Account