The widely tracked Dow Jones Industrial Average, or DJIA, has been in a strong downtrend over the past couple of weeks.
It has now approached a crucial support area. There is a confluence of supports between 26200 and 26600, as highlighted below:
- 23.6% fibonacci retracement at 26590
- Double top neckline at 26537
- CD leg would complete equality to AB leg at 26295
- 200-day SMA at 26214
The index formed a spinning top candle yesterday, right above the lower end of this confluence zone. A break and sustainability above the high of this candle (26891) could ease some of the selling pressure on the index.
However, if the DJIA closes below the lower end of the support zone, we could see a deeper correction in the US markets going forward. And given the impact US markets have on world markets, a deeper correction in the US markets would mean trouble for global markets as well. Hence, it is worth keeping an eye on how the DJIA behaves in the next few sessions, especially with the US elections looming around.
