Dow Jones Technical Analysis: Technical Tuesday - February 11, 2025

Dow Jones Technical Analysis

Dow Jones technical analysis: The major US indices such as the Dow and S&P 500 continue to trade inside ranges and unable so far to break out to new all-time highs, unlike European indices where the DAX has surged to yet another record today. While some mixed-bag earnings, trade wars and rising yields have certainly slowed the pace of the prior rally, the underlying trend remains bullish until the charts tell us otherwise. For the Dow, the rebound in energy prices is certainly helping the energy sector (XLE) while industrials (XLI) and financials (XLF) are also not doing too badly. Will the performances of these sectors be able to lift the Dow to a new all-time high, or will macro concerns undermine sentiment?

Source: TradingView.com

From a technical point of view, the Dow Jones chart is currently holding its own above the 21-day exponential average and support around 44,200. While above this level, the short-term path of least resistance remains to the upside. However, a daily close below this zone could pave the way for a deeper retracement, with the next support not seen until 43385. We could even see a dip to test the bullish trend line that has been in place since October 2023. The trend line is currently intersecting at 42500-42600 area.

But if the abovementioned support holds, then we could, finally, see a breakout above key resistance between 44800 to 45000 zone. This resistance area has been tested and defended on multiple occasions. But the more recent tests of this area have only led to moderate selling. The more a key level is tested, the more likely it will break in the direction of the test. So, a bullish breakout looks to be on the cards, but that’s not to say the breakout will necessarily hold. That is a completely different topic.

Investors Keep Watch on Trump’s Trade Tactics

Traders have largely shrugged off the latest tariff moves on steel and aluminium from Donald Trump, viewing them more as a negotiating ploy than a genuine economic shift. With tariffs set to take effect on 4 March—unless a deal is struck in the meantime—the markets are taking a wait-and-see approach. For now, there’s little cause for alarm, though any further escalation from Trump could shift sentiment quickly.

Attention was also on Federal Reserve Chair Jerome Powell’s testimony today. With key US inflation data on the horizon, it was always unlikely that Powell would adopt a dovish stance. True to form, he reiterated that there is no urgency to adjust policy, keeping markets in something of a holding to slightly bullish pattern for now.

Bond Yields on the Rise

One trend that is becoming increasingly apparent is the steady rise in bond yields, buoyed by Friday’s strong jobs report. Wage growth came in at 0.5%, while the University of Michigan’s inflation expectations survey jumped more than forecast, adding a fresh layer of uncertainty around inflation. As a result, investors are reassessing their outlook on rate cuts, pushing yields higher. So far, this has not impacted the stock markets but if we see yields on the 10 year start climbing towards the January highs of around 4.800% then that could spook the markets.

Key Data to Watch: CPI in Focus

Following last week’s hotter-than-expected inflation expectations and an uptick in average hourly earnings, US CPI figures will be released tomorrow. If inflationary pressures show signs of persisting, the Fed will have little reason to rush into further rate cuts. Headline CPI is forecast to remain steady at 2.9%, but any surprises could move the needle on market expectations. Beyond that, Thursday brings PPI data, followed by retail sales figures on Friday—making for a week packed with key economic indicators.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R