The Dow Jones Industrial Average cash index fell below the upside support line drawn from the low of June 15th. At the same time, the index appears to be respecting a new downside line taken from the high of September 3rd. Currently, Dow is trading slightly below the 27175 support level, marked by the low of September 3rd, a move that confirms a forthcoming lower low on the daily chart. With all these technical signs in mind, we would consider the near-term picture to be negative.
If the bears are willing to stay behind the driver’s seat, we could see the price dropping towards the 26710 or 26550 barriers, marked by the inside swing high of July 28th and the low of August 4th, respectively. Another break, below 26550 may set the stage for extensions towards the low of July 31st, at 26020.
Shifting attention to our short-term oscillators, we see that the RSI points down and has just ticked below its 30 line, while the MACD lies below both its zero and trigger lines, pointing south as well. Both indicators detect strong downside speed and support the notion for further declines in this index.
In order to abandon the bearish case and start examining the resumption of the prevailing uptrend, we would like to see a strong recovery above 28055. Such a move would not only take the price back above the upside line taken from the low of June 15th, but also above the newly drawn downside line taken from the high of September 3rd. The bulls may then get encouraged to shoot for the 28370 or 28605 hurdles, marked by the highs of September 16th and September 4th respectively, where another break may see scope for an acceleration towards the peak of September 3rd, at 29200.
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