Dow Jones is looking to resume lower towards 23000 over the short term. The indice had managed to carve a lower high at 27700 levels in early June 2020. It is acting as immediate resistance and the indice is expected to remain below the 27700 mark.
Let us have a look at the larger degree potential wave counts first. The drop between 29600 and 18200 can be clearly sub-divided into 5 waves, making it an impulse wave labelled as Wave (1) on the chart. As discussed earlier, an impulse is normally followed by a corrective wave.
Dow Jones had rallied from 18200 through 27700 sub-dividing into 3 waves, hence corrective. This counter trend rally has been labelled as A-B-C, terminating into similar degree Wave (2). If the above holds true, Dow Jones must stay below 27700 and resume lower towards 23000 and beyond.
Further, also note that the counter trend rally, Wave (2) had managed to reach fibonacci 0.786 retracement of Wave (1), a typical guideline of the Wave Principle. A potential Wave (3) of larger degree might be underway since 27700 highs.
Looking further into lower degree wave counts; the drop between 27700 and 24843 was again in 5 waves, labelled as Wave 1 on the chart. Wave 2 might have unfolded as a running flat and might be complete at 26300/400 levels.
If the lower degree counts hold well, Dow Jones must proceed lower from here and push through the 23000 mark. The fractal nature of markets can be seen at all degrees, where the classic pattern 5-3 is repeated over and over again.
Overall, Dow Jones remains a candidate to be sold on rallies, until prices stay below 28000 levels, ideally.
Technical Analysis Team
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