Dow Jones remains completely in control of bears over the long term. Not seen on the hourly chart here, the indice has carved a meaningful top at 29600 levels in February 2020. Since then, a larger degree impulse drop has been carved by dropping towards 18200 (not seen here).
Dow Jones larger degree wave structure is a classic 5-3 Elliott Wave pattern. Believe it or not, the same wave structure is being carved at a lower degree as well, seen on the hourly chart. The indice had dropped from 27600/700 mark on June 10, 2020 through 24544, sub dividing in 5 waves, Wave 1.
The subsequent rally could be complete at 26800 mark or towards the 27000 levels, Wave 2 on the chart. A 5 wave drop, followed by a 3 wave rally is a classic Elliott Wave pattern, which is followed by another 5 wave drop, going further.
If the above lower degree counts are correct, Dow Jones might be preparing for a sharp bearish reversal anytime soon. Also note that prices must stay below 27600/700 mark to keep the above bearish structure intact.
It remains to be seen if bears are able to push below 24544 directly from current levels or after rallying towards 26800/27000. Either way, Dow Jones is setting up for the next bear cycle which could drag pries lower towards 18200 mark, going forward.
Also note that Wave 2 has managed to travel just above the fibonacci 0.618 retracement of Wave 1. If the corrective wave is incomplete, we could witness another sharp rally towards 26800/27000 mark before reversing lower again. That would be fibonacci 0.786 retracement of Wave 1.
Traders might be prepared to initiate fresh short positions, if prices manage to reach 26800/27000 mark again. The protective stop could be above 27700 and projected targets below 18200 levels, going forward.
Technical Analysis Team
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