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Nick Goold

Technical analysis

The Dow is always a closely watched market for all traders as it represents the health of the US economy. Especially in 2022, the Dow`s impact on risk sentiment in FX, commodities, and other assets is large. Since August, the Dow has come under aggressive selling pressure due to higher US interest rates and negative economic growth worries.

In the past week, the Dow has broken the 30,000 level resulting in prices making a new low for 2022. Monday saw a rise as the market hopes the US Federal Reserve will be less aggressive increasing interest rates due to recent weak economic announcements. The closely watched 10-year US interest yield hit 4% last week but fell back 3.6% on Monday.

The fall from the August highs has resulted in an oversold market, so further gains would not be surprising in the short term. A move back above 30,000 seems likely as bargain hunters enter the market, so day traders are best to focus on buying in the short-term. The medium-term downtrend is still strong, so swing traders are best to be patient and wait for the short-term rise to end and sell the Dow.

Daily NY Dow with 10 day moving average

Resistance:30000, 30500, 31500, 32000, 32650, 33000, 34000
Support:27500, 26500

Why the Dow is an attractive market to trade

1. High volatility

The Dow has exhibited very high volatility in 2022, presenting many trading opportunities for all types of traders. High volatility means traders can extend profits easily, resulting in high-risk reward ratios (profits greater than losses). High volatility also means more trading opportunities to make more profits.

2. Strong trends

Due to the many news events recently, price trends in the Dow have been strong on both short and long-term charts. Strong trends are attractive for traders as following the trend can result in large profits. Alternatively, finding a trend reversal can be a profitable strategy as well.

3. Narrow spreads compared to the volatility

The Dow has many active traders, so the difference between buying and selling prices is small compared to the volatility of the Dow. Other markets might have narrower spreads, but their volatility is low. The Dow offers a good balance of a narrow bid/offer spread, and high volatility making it easier to earn long-term profits than other markets.

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