The Dow Jones Industrial Average cash index traded higher yesterday and today after it hit support at 33100. However, in our view, the overall near-term picture remains negative, as the price structure on the 4-hour chart remains lower highs and lower lows. In contrast, the index remains below the critical territory of 34120, which acted as key support between Apr. 7 and 13 and as a key resistance between Feb. 25 and Mar. 3.
The current recovery may continue for a while, even above yesterday’s high of 33700, but we do see decent chances for the bears to retake charge from near the 34120 zone. This could result in another leg down to the 33100 zone, the break of which will confirm a forthcoming lower low and may pave the way towards the 32800 territory, which provided decent support between Mar. 10 and 15. If the sellers are not willing to stop there either, then we could see them pushing the action down to the 32290 territory, marked as support by the lows of Feb. 24 and Mar. 8.
Shifting attention to our short-term oscillators, we see that the RSI, although below 50, has turned up again, after hitting support near the 30 line, while the MACD, although negative, lies above its trigger line, pointing up as well. Both indicators detect slowing downside speed and support the notion of some further recovery before the next leg south.
To start examining the bullish case again, though, we would like to see a clear break above the 34320 zone, which provided support on April 18th and 19th. The index will already be above the key zone of 34120, the break of which will confirm a forthcoming higher high.
The bulls could take the battle towards the 34600 zone, or the 34800 territory, defined by the high of April 22nd, the break of which could see scope for advances towards the high of Apr. 5, at 35100. If they don’t stop there either, we could see them pushing towards the high of Apr. 21, at 35490.