Dow Jones
Dow Jones breakout comes closer and closer as the range becomes smaller and smaller. Despite having so many reasons to break, it fails to do so, although sits at all-time highs.
The Fed’s decision to keep the monetary policy as is created an initial move lower in the Dow Jones. However, it was not so bearish to break the range. Once futures opened, the index reversed course.
At this point, we may argue that the Dow waits for something. Could it be that it waits for the fiscal stimulus in the United States before the next leg higher? Or can we argue that this is nothing but a rising wedge pattern and that the market waits for a break of the lower edge? Both scenarios could work, but it could also be that the Dow consolidates for the rest of the year. Therefore, to avoid some more consolidation, the best way is to wait for a breakout before committing to buying or selling the index.
Bears should keep their eyes on the rising, lower trendline. A break and close below signal a sharp reversal, one that could also trigger a stronger USD. If that is the case, a stop-loss at the highs is mandatory and a risk-reward ratio of 1:2 or bigger. Bulls should stay on the long side with a stop at the last higher low and keep trailing their stop as the time passes.
