Indices Market Analysis – Dow Jones

*An update on the Dow Jones Index, my trade positions and my future price predictions*

Happy Friday! In this blog post I am going to talk to you all about the Dow Jones Industrial Average Index (DJI), the US Stock markets and how I am trading the Dow. I will explain my thoughts on what has moved the markets over the past week and where I think price will go next.

I have posted a few blog posts this week including a recent trade breakdown for a high momentum “day trade” and a general discussion on the finical markets and current global economic slowdown. If you haven’t seen these yet then click on the links below to read them now.

Let’s get right in to it and look at the last 10 trading days of price data on a chart.

Dow Jones 1 hour timeframe chart
19/03/2020 – 03/04/2020

It’s been an eventful few weeks for the Dow Jones and all other global indices. A sell-off on equities has seen multi year lows reached on all Indices with the dow approaching 18,000 for the first time in 4 years.

Governments around the world have been cutting interests rates in emergency reactions to the current economic situation and announcing huge fiscal stimulus packages to try and rescue the markets from the selling with varied success. It took the announcement of a $2 trillion stimulus package from the US Fed before stocks began to rally from around 18,250 (the lows on the chart shown above) up to the previous resistance zone at 22,500.

Something that has been more interesting to watch is the huge daily volatility swings in price. It used to be rare to see price swing 500 points in a single trading day but recently we have seen price swing more than 1000 points in any direction. It really is crazy.

It is no surprise that implied stock market volatility shown by the CBOE VIX has recorded its highest values since the 2008 crash. See this on the chart below.

What are the causes of this increase in market volatility and drop in equities?

The obvious one is Covid-19. It has sent multiple countries on lockdown, shut down businesses in every industry and sector and killed thousands of people. Recessions only occur when money stops moving and consumers lose confidence… we have seen the whole world lose confidence thanks to Coronavirus.

Tensions in the crude oil market has not helped the situation with Saudi producers cutting the price of oil by $6-$8 per barrel and refusing to cut output. This created what is now being called the “2020 Russia-Saudi Oil Price War” and saw the price of Crude Oil drop from $65bbl down to below $20bbl in less than 3 months.

My current trade positions.

The chart below shows my current short trade position on the Dow Jones Index. I am now shorting US stocks and I unfortunately missed the initial sell-off because I was skiing but I would have done the same in late February/early march 2020.

As always, the technical analysis and entry for this short trade was shared on my TradingView profile prior to entry. You can track the progress of this trade live by clicking on the link below.

Dow Jones 15 minute timeframe chart
(short position)

My entry was taken using the 15 minute chart (shown above) in conjunction with the 4hr/daily price charts. There was resistance forming at the 22,500 level and a double top rejection was forming. Once I saw this I dropped to a lower timeframe to find a better reward:risk trade entry using a very simple trade reversal pattern. Can you spot it on the chart above?

Dow Jones 1 hour timeframe chart

The chart above shows my short position on a slightly higher timeframe. I have used this to show you the various support/resistance zones I have on my chart which I am going to be using for profit taking targets over the next few days and weeks.

You can see that the 22,500 zone (upper line) has shown multiple rejections and price reactions over the past 2 weeks so it was really quite an effective and low risk area to sell at this week. Price is now currently consolidating around my first profit target zone which I am yet to take profit at because I believe this zone will soon be broken. So far price has dropped over 1300 points from the entry level.

If (and when) this support zone breaks I have marked on two further profit target zones which I will be looking at. Ideally I want US stocks to continue selling off and at least reach the previous lows around 18,250 or lower.

Future price predictions for the Dow Jones Index.

Dow Jones 1 hour timeframe chart
(price predictions)

The chart above shows some potential scenarios for price movements over the next few days and weeks if the current support zone at 21,200 is broken. I would like to see new intraday lower lows made before price starts to form a nice bearish trend down to further lows.

A break and retest of support zones provides excellent, simple trade entries but there is also the potential to see another strong bearish move downwards. If there is more bad economic data to come form the US, further lockdowns and more Covid-19 drama then it is highly likely we will see liquidity removed from the stock markets once more and sell-offs to continue.

Market Fundamentals.

There is a lot of economic data to come out next week relating to the USD and US stock markets so that should provide some directional momentum. US Consumer CPI Data (10th April), US Crude Oil Inventories (8th April) and the FOMC march meeting minutes (April 8th) are all considered to be high impact news invents so keep an eye on them.

I use the DailyFX economic calendar to monitor incoming data releases and high impact fundamentals. It is completely free to use and very simple and effective. You can filter by country, date and impact severity. Click on the link below to view it now.

End Note.

If you are struggling to trade these highly volatile markets at the moment then please do message me. I will happily give you some advice and point you in the right direction.

If you are wanting to learn more about trading the financial markets the right way then please check out my Mastering The Markets – Retail Trading Course.

Useful Links:

All my technical analysis is done using the TradingView platform. You can get access via the link below.

My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.

FTMO Trader Funding Programme.

Thanks for reading and please don’t forget to LIKE, SHARE and FOLLOW my blog to stay up to date with the latest market analysis and trading education posts.

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

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