The year started with the Dow Jones sliding from record highs. As traders got used to, most Dow Jones rallies happen in the futures market, while the sliding takes place when the cash is open. As such, from the moment that the cash market closed, the Dow has found support and bounced. So did the main FX pairs, with the EURUSD recovering back to the 1.23 level and the AUDUSD recovering the lost ground too.
The markets are at risk of the Democrats winning at least one Senate seat of the two at stake in the Georgian run-off. Republicans have the majority and will still have it should the Democrats win one seat. What if the Democrats win both seats? If that is the case, the Dow is at risk of moving even lower because the chances are that Democrats will pass legislation that is not viewed by markets as stimulative.
Dow Jones Bearish Outlook
While below the black trendline, the Dow is bearish. Bears may want to wait until it breaks yesterday’s lows before jumping on the short side. An even more conservative approach is to wait for the Dow to break the series of higher lows, typical in bullish markets. When and if that happens, going short makes sense with a stop at the highs and a target at the November 2020 Election Day lows.
Dow Jones Perspective
