DJIA Hits New Highs Amid Caution: Key Economic Events Could Trigger Market Shifts

The Dow Jones Industrial Average (DJIA) has experienced a strong upward trend since early August, fueled by bullish technical signals, reaching resistance levels and recording new all-time highs. However, the other two main indices (S&P 500 and NASDAQ 100) didn’t perform as strongly. Furthermore, caution is advised as a potential bearish divergence suggests the possibility of a downward correction.

Traders are expected to closely monitor the Index in light of the forthcoming release of significant economic data that could potentially impact its direction.

Friday 02:50 am (GMT+3) – Japan: Retail Sales m/m (JPY)

Friday 04:30 am (GMT+3) – Australia: Retail Sales m/m (AUD)

Friday 09:45 am (GMT+3) – France: GDP q/q (EUR)

Friday 15:30 (GMT+3) – Canada: GDP m/m (CAD)

Friday 16:30 (GMT+3) – USA: Core PCE Price Index m/m (USD)

Saturday 04:00 am (GMT+3): China: Manufacturing PMI (CNY)

The Dow Jones Industrial Average (DJIA) has been on an upward trajectory since August 5, when it hit a low of 38401.33. The upward movement was signaled by a Japanese candlestick reversal formation known as a Tower Bottom, which paved the way for the bulls to pull the DJIA higher. As prices moved above the 20 and 50-period Exponential Moving Averages (EMA), the momenetum was intensified, leading the Index to surpass the all-time high of 41410.20 recorded on July 18. Both the Momentum oscillator and the Relative Strength Index (RSI) indicate a bullish outlook, registering values above the 100 and 50 baselines. However, on closer inspection, a bearish divergence between the price and the Momentum oscillator can be observed, indicating a potential downward correction.

Should the bulls maintain market control, traders may direct their attention toward the three potential resistance levels below:

41444.96: The first price target is identified at 41444.96, reflecting the daily high marked on August 26.

41599.69: The second target is seen at 41599.69, corresponding to the peak marked on August 29.

42041.72: The third price target is determined at 42041.72, which corresponds to the resistance (R3) calculated using the weekly Pivot Points method.

Should the sellers take market control, traders may consider the four potential support levels listed below:

40998.87: The primary downside target is identified at 40998.87, which corresponds to the weekly Pivot Point (PP) calculated using the standard method.

40776.14: The second support level is 40776.14, representing the support (S1) calculated using the weekly Pivot Points method.

40377.92: The third support line is established at 40377.92, aligning with the 38.2% Fibonacci Retracement between the swing low at 38401.33 and the swing high at 41444.96.

39623.10: An additional downward target is observed at 39623.10, corresponding to 61.8% Fibonacci Retracement between the swing low at 38401.33 and the swing high at 41444.96.

In conclusion, while the Dow Jones Industrial Average (DJIA) has shown robust upward momentum, reaching new all-time highs, the presence of a potential bearish divergence and weaker performance in the S&P 500 and NASDAQ 100 suggest caution. As key economic data releases approach, traders should remain vigilant, as these events could significantly influence the market’s direction. Close monitoring of resistance and support levels will be essential in navigating potential shifts in the DJIA’s trajectory.