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Dow looks to build on recent positive price action

Nick Goold

Market analysis

A positive week for the Dow as the market gained strength from holding the support at the yearly lows earlier this month. Volatility was lower last week as there were few news events, and the market was in a range. On Friday, the market rose significantly on reports that the US Federal Reserve might not raise rates as quickly as expected. 

The 10-day moving average is pointing the market higher now, so the chart picture for the Dow is now positive. Swing traders looking to buy should wait for the market to fall from current levels as the market is overbought in the short term. The fall from August to September was significant, so there is a potential for the Dow to move back above 32,000 in the coming weeks.

The only major news announcement of the week is Monday’s release of US PMI figures. With a lack of news, the current uptrend is likely to continue this week, and traders will focus on using technical analysis to find trading opportunities.

Daily NY Dow with 10 day moving average

Resistance：31500, 32000, 32650, 33000, 34000

Support：30000, 29000, 28500, 27500, 26500

How the Dow impacts other markets

The Dow is a measure of 30 biggest stocks listed on the US stock market and is an indicator of the health the US economy. Movements in the Dow can impact other markets like FX, commodities and stock indices, so all traders will benefit from watching the Dow.

Forex exchange

A rising Dow Jones index will see foreign exchange pairs like USDJPY, GBPUSD, EURUSD and GBPJPY rise as those pairs are considered risky. While a rising Dow Jones can see the Swiss Franc fall and the Yen become stronger.

Commodities 

Gold can be a hedge against market risk. Higher levels in the Dow reduces demand for gold resulting in lower prices. A rising Dow can be seen as positive for Crude oil as a strong stock market signals a strong economy which is positive for Crude oil demand.

Stock indices 

The Dow can be a leading indicator for other markets like the Nikkei 225. Especially when the Dow is open while other stock markets are closed, movements in the Dow have an impact on other stock indices.

What to watch for in the Dow

All traders should understand the trends in the Dow as it will help you find profitable trades. Should the Dow break support or resistance level, volatility in other financial markets is likely to increase.