The DJIA cash index tumbled yesterday, exiting briefly the sideways range between 25775 and 26170, that’s been containing most of the price action since mid-February. That said, the index hit support near the 25630 zone, marked by the inside swing high of February 13th, and rebounded to return within the aforementioned range. Therefore, given that the index is back within its recently established sideways path, we will stay neutral for now.
We prefer to wait for a decisive dip below 25630 before we start examining whether the short-term picture has turned negative. Such a move could confirm the downside exit out of the range and may allow declines towards the low of February 15th, at around 25270. If that zone fails to halt the slide, then we may experience extensions towards the psychological zone of 25000, also marked by the low of February 11th.
Taking a look at our short-term oscillators, we see that the RSI, already below 50, has turned down again, but the MACD, even though below both its zero and trigger lines, shows signs of bottoming. These conflicting momentum signs confirm our choice to stand pat for now and wait for clearer directional moves from this index.
On the upside, a strong break above 26250 may signal the upside escape from the aforementioned sideways range, also confirming a forthcoming higher high. Such a move may initially see scope for bullish extensions towards the 26540 zone, defined by the highs of October 8th and 9th, the break of which may pave the way for the high of October 5th, near 26730.
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