E-mini Dow Jones Industrial Average (YM) Futures Analysis – Technicals are Bullish, but Market Ripe for Reversal Top

December E-mini Dow Jones Index futures hit a new all-time high last week and also posted a record close. The rally was generally supported by the low-interest rate environment although the Fed meeting did reveal a hawkish central bank.

The U.S. Federal Reserve kept interest rates unchanged, but said it would begin reducing its balance sheet in October. It also left open the possibility of a third interest rate hike in December. This news helped drive up banking stocks like Goldman Sachs which underpinned the Dow. Healthcare stocks also rallied late in the week, but gains were limited by a steep decline in Apple .

Weekly Technical Analysis

The main trend is up according to the daily swing chart. A trade through 22389 will signal a resumption of the uptrend. The main trend will change to down on a move through 21545.

There is no true resistance at this time which puts the emphasis on the chart pattern. The best sign of resistance will be the formation of a weekly closing price reversal top.

Weekly Forecast

Since the main trend is up, the tone of the week is likely to be determined by trader reaction to last week’s high at 22389 and last week’s close at 22299. Three scenarios could take place.

Firstly, buyers could take out 22389 and never look back. Secondly, sellers could defend 22389 and pressure the market lower and thirdly, buyers could take out 22389 then close below 22299. This will form the potentially bearish closing price reversal top.

The nearest uptrending support angle is 22185. This angle has been guiding the market higher for four weeks. We could see a technical bounce on the first test of this angle, but if it fails then look for an acceleration into the next uptrending angle at 21865.

If 21865 fails then the selling is likely to extend into the major long-term uptrending angle at 21713, followed by the main bottom at 21545.

The technicals are bullish, but we have geopolitical issues hanging over the market. If the situation with North Korea escalates, for example, sellers will probably take out the support angles.

This article was originally posted on FX Empire

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