Dow Jones futures point to a weak opening as the market struggles to hold above 27,000. The weakness started to be seen towards the end of last week, continues so far, as Dow Jones struggles at dynamic support. Should the support go, bears will focus on the price reaching the measured move of a head and shoulders pattern around $25,600.
The week ahead is packed with important economic events. The economic calendar shows Fed’s Powell holding a speech each day of the week except Friday.
As always, when the Fed speaks, the market’s volatility is on the rise. This week, Powell testifies in front of the Senate, and his comments, alongside Treasury Secretary’s Mnuchin comments, will be closely watched.
The market still needs more clarification from the Fed regarding its way of implementing the Average Inflation Targeting mandate. Last week’s FOMC statement and press conference failed to reveal how the Fed will average inflation data. More clarity is needed, and perhaps this is one of the reasons why the stock market failed to rally on dovish Fed statements.
Dow Jones Technical Analysis
Dow Jones looks weak here as all bounces have been so far sold. A break below the neckline opens the gates to a move to the 25,600, as suggested by the head and shoulders’ measured move.
After a head and shoulders pattern, the price tends to retest the neckline, although such a retest is not mandatory. Aggressive traders may want to go short at market and stay for the measured move, while having a stop-loss order at the highest point in the right shoulder.
However, a more conservative approach requires waiting for the market to break below the neckline first. Next, a bounce to retest the neckline comes as a confirmation that the reversal pattern is in place. This way, conservative traders avoid a potential false breakout.
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Dow Jones Price Forecast
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