Dow Jones rally yesterday might have taken quite a few traders by surprise. The indice managed to print 26650 (spot) mark around market close. Futures is trading higher as of now around 26880 levels. Technically, it was expected and probability always remained for an interim high above 26800.
Most interesting part to note is that Dow Jones is holding below 27580 (spot) high from June 2020. This keeps the lower degree potential wave structure intact, and bears could resume lower any moment.
The larger degree wave structure is as follows: Dow Jones had dropped between 29600 and 18200 levels, sub-dividing into 5 waves, an impulse. This has been marked as Wave (1) on the daily chart here. Ideally it was expected to produce a corrective rally.
Dow Jones then rallied towards 27580 levels, carving a counter trend rally sub-dividing into 3 waves, A-B-C, hence corrective. This has been marked as Wave (2) here. Also note that Wave (2) had managed to reach just above fibonacci 0.786 retracement of Wave (1) before reversing lower again.
If the above larger degree counts hold well, Dow Jones is set to resume Wave (3) lower towards 23000, 20000 and 18200 over the next few months. Also, the indice should ideally stay below the 27580 (spot) levels, going further.
The lower degree wave counts since 27580 highs suggest the following: Dow Jones had dropped from 27580 through 24843 as an impulse, hence marked as Wave 1 on the chart. The indice has now completed a corrective flat structure around 26650 (spot), marked as Wave 2.
If the above holds well, the indice should reverse sharply lower from here and also stay below 27580 interim resistance. Dow Jones might be preparing for the biggest drop since 1929.
Technical Analysis Team
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