Despite a slightly higher open by the Dow Jones Industrial Average this Thursday, there are indications that the hawkish FOMC minutes may put off investors from further buying. This could lead to a selloff that targets the 33,000 price mark.
Excerpts from the FOMC minutes showed that several Federal Reserve policymakers had triggered a discussion of tapering the QE program. Tapering will dry up the cheap finance and credit that has driven the growth of the US stock markets. The situation will also spark speculation about rake hikes, which drives up bond yields and causes a capital shift from the stock market to the bond market.
The Dow is currently trading 0.45% higher as a result of the drop in initial jobless claims from 478K to 444K.
Technical Levels to Watch
The recent conclusion of the bullish flag on the daily chart peaked at the 35102 price mark, which is now the all-time high. The candle that formed this high was a pinbar and the subsequent progressively lower tops set the stage for a price decline that targets 33249. So far, bulls remain resilient, but if prices go south, we can expect the test of 33249. A breakdown of this area allows bears to push towards 33000 initially, followed by 32363. A further decline meets the 25 February high/25 March low at 32084, with 31739 and 31282, forming targets to the south.
On the other hand, a bounce from the current levels allows for a test of the upper triangle trendline. A break of this price level targets the all-time high at 35102 (141.4% Fibonacci extension level), with a further advance potentially targeting 36,000 via a measured move,
and 36392 (161.8% Fibonacci extension) also in the picture.