Dow Jones Has Carved A Lower High Around 27600/700

01 July 2020

Dow Jones has managed to rally over the last two sessions closing above 25700 mark. Believe it or not, this is just a pullback rally and it is just a matter of time before bears are back in control again. The indice is expected to resume lower again towards 23000 levels over the short term.

Let us re-look at the proposed wave counts on the hourly chart presented here. The larger degree Wave (1) had dropped from 29600 through 18200, sub dividing into 5 waves (not seen on the view here). The subsequent counter trend rally from 18200 lows, A-B-C on the chart here, managed to push towards 27600/700 levels.

It has been marked as higher degree Wave (2). Please note the fibonacci 0.786 retracement of Wave (1) was tested before reversing lower. Ideally, Dow Jones should remain below June 09, 2020 highs around 27600/700 and continue lower towards 23000 and beyond.

Dow Jones has managed to carve a classic Elliott Wave pattern 5 Waves Down, followed by 3 Waves Up until 27600/700. Going by the general guidelines of the wave principle, the indice should produce another 5 wave movement towards the major trend, which is down.

Looking at the lower degree wave counts, the drop between 27600/700 and 24843 was also in 5 waves making an impulse, Wave 1 on the chart here. The subsequent rally was again corrective and reached the fibonacci 0.618 retracement of Wave 1 around 26555 mark. If the above lower degree counts are correct, Dow Jones should be on its way sharply lower towards 23000 as Wave 3 unfolds.

Most traders might have already initiated fresh short positions around 26555 levels with risk above 27600/700 and potential targets below 23000 in the short term. Only a break above 27600/700 and subsequently above 29600 would change the structure.

Prepared by
Technical Analysis Team

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