Turmoil in equity markets continued last week as the Dow Jones, S&P 500 and even the Nasdaq slipped lower. While losses were more gradual than two weeks ago, the consistency with which stocks have fallen from their June peaks has seen the Dow Jones etch a concerning series of lower highs. As a result, a descending trendline projection can be drawn from the June 9 high and it seems the Dow Jones is vulnerable to further losses at this stage.
DOW JONES PRICE CHART: 4 – HOUR TIME FRAME (FEBRUARY – JUNE)
To that end, the Dow is quickly approaching an area of key importance marked by the swing low on June 15 at 25,525. If price probes 25,525 and breaks beneath, it would establish a lower-low which would effectively further the bearish pattern that has emerged since June 10. Thus, holding above the level in question might prove essential in staving of a continuation lower. Should the Dow fall further, subsequent support near the 24,000 mark may act as an early area of assistance.
The CAC 40 finds itself in a relatively strong position by comparison, a surprising turn of events for an index that has lagged the US leaders. Either way, it seems its slow churn higher has allowed it to avoid some of the steeper losses experienced by the Dow Jones, S&P 500 and Nasdaq 100. That being said, the CAC 40 remains trapped between a multitude of horizontal levels.
In turn, USD/JPY may trade within a more defined range asthe pullback from the monthly high (109.85) reverses ahead of the May low (105.99), and the RSI may indicate a further appreciation in the exchange rate if the oscillator breaks above 50 and climbs towards overbought territory.
USD/JPY appears to have marked another failed attempt to test the 105.80 (61.8% expansion) region as it reverses ahead of theMay low (105.99), and the exchange rate may continue to retrace the decline from earlier this month as it attempts to push back above the 50-Day SMA (107.37). As a result, the close above 107.20 (61.8% retracement) brings the Fibonacci overlap around 108.00 (23.6% expansion) to 108.40 (50% retracement) on the radar, with the next area of interest coming in around 109.40 (50% retracement) to 110.00 (78.6% expansion), which lines up with the June high (109.85).