S&P 500

Dow Jones in Free Falling – Is a Double Top in Place?

Dow Jones reacts strongly to the lack of fiscal stimulus and renewed violence in the United States. It currently trades below 27k, and it seems to have formed a double top pattern at 29k. If that is the case, the measured move points to 24k.

Moreover, on its way to that level, the Dow will break the series of higher lows it built since the March 2020 lows. Effectively, it means that the bullish trend is over, and bears take control of the stock market.

Equities React to No Stimulus and Renewed Violence in the United States

A new round of stimulus was unlikely to come until the elections. Despite ongoing negotiations, this is too much a political decision to be taken ahead of the elections.

The equity markets face a reality check and suddenly, bulls are under pressure. The Dow Jones index is the only one of the major indices (e.g., S&P500, Nasdaq 100) that did not reach a new all-time high during the pandemic. This was one of the drivers for the Dow bullish case, but the closer we get to the elections, the less likely is that the Dow will manage to do it.

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With the earnings season in full swing, the Dow looks poised to focus on the general risk-off/risk-on market moves. Uncertainty and renewed violence in some parts of the United States usually trigger a higher USD. This, in turn, puts pressure on equities.

Dow Jones Double Top?

The double top’s measured move points to the 24,000 level. To make the most of it, aggressive bears might go short at market and place a stop at the double top level.

However, perhaps a conservative approach will make more sense. For this, conservative traders might want to wait for a break of the neckline before shorting the index for the same target and having a similar stop.

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