Dow Jones analysis – Index vulnerable to break below 27000

July 29, 2019 | SQUARED DIRECT – US indices ended higher on Friday at the back of upbeat earnings reports from the tech sector. The Dow lagged alongside its peers as it is underweight in tech shares. Separately on economic data, the US Q2 GDP figure revealed that economic growth slowed to 2.1%.

The figure is down from Q1’s 3.1% but beats the lower estimate of 1.8% which helped offset the negative impact of decelerating growth. It’s a busy week ahead as the FOMC meeting awaits, US-China trade talks begin and earnings release continue.

We can expect the Dow to find direction on Tuesday’s FOMC interest rate decision as monetary policy remains the dominant market theme. For today, there are no major economic releases from the US and markets will look to trade headlines to influence sentiment as the US and China resume talks.

Dow Jones technical analysis

The Dow gained 52 points to end at 27192 on Friday. The price bounced off the ascending trend line from June 27th low, however, traded below the 20-period MA. It is worthy to note that the daily RSI reading is trending lower leaving the Dow vulnerable to break below the psychological support at the 27000 level.

Holding below the 20-period MA near the resistance at 27220 should maintain selling pressure while a trade through the support near the 20-day MA at 27070 would signal downside pressure and lead the Dow towards the 27000 level. Alternately, a sustained move above 27220 would indicate buying pressure and target the higher resistance at 27340.

Support: 27070/27000
Resistance: 27220/ 27280

Chart (H4)


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