The Dow Jones Industrial Average cash index traded higher yesterday and today in Asia, to hit resistance near the 34500 barrier, marked by the high of May 18th. The broader trend of the index remains positive, as it is marked by the tentative upside support line drawn from the low of January 31st. That said, before we start aiming higher, we would like to see investors overcoming the 34500 barrier.
If they manage to do so, we could see the index hitting once again its record high of 35092, achieved on May 10th. A break higher will confirm a higher high on the larger time frames and take Dow into uncharted territory. However, before the next leg north, market participants may allow a pullback, perhaps towards the 34120 area, marked by an intraday swing low formed on May 21st.
Shifting attention to our short-term oscillators, we see that the RSI shows signs of topping slightly below 70, while the MACD, although above both its zero and trigger lines, shows signs of topping as well. This shows decelerating upside momentum and strengthens the case of a possible setback before the next leg north, perhaps near the 34120 area.
Nonetheless, in order to start examining the case of a deeper downside correction, we would like to see a clear dip below 33930. This may encourage declines towards the low of May 19th, at 33475, or the low of May 13th, at 33285. If neither level is able to halt the slide, the bears may then target the aforementioned upside line taken from the low of January 31st, or the 32970 area, defined as a support by the lows of March 30th and April 1st.
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