Dow Jones Might Find Short-Term Support at Current Levels

Today, the Dow Jones is trading lower as projected in yesterday’s update. There are talks that trade wars have triggered the move lower, but the most natural reason is simple profit-taking. The index rose sharply from last week’s low and received a boost on the less bad than expected NFPs.

Technically, the Dow almost reached the critical resistance level at 26702, and this proved to be a perfect chance for traders that bought last week to book profits. It was also a chance for aggressive bearish traders to short-sell the Dow Jones.

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The Dow Jones index has now given back most of its gains following last week’s better than expected Nonfarm Payrolls report and is resting just above an important trendline. The stock index is also near the October 4 low of 26107, and the index might rise slightly from current levels. However, yesterday’s high will probably block buyers as the short-term trend is bearish below the October 7 high of 26662.

If the trend indeed remains bearish, I suspect that the price will eventually try to test the October 4 low of 26107 before trying to reach last week’s low of 25743. After that, we would need to see, but the longer-term trend remains upwards, and I suspect that bullish traders will try to build a bullish exposure between the August 28 low at 25630, and the 26000 levels.Download our latest quarterly market outlook for our longer-term trade ideas.

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