S&P 500
Dow Jones forms a triangular pattern since November 9th. The euphoria generated by the first announcement of a vaccine against the coronavirus met strong resistance at the 30,000 level. From that moment on, the index did not manage to break higher nor lower. In fact, it formed a triangle that may act both ways – as a continuation or as a reversal pattern.
The indecision in the United States does not help. As the country is in a transition of power, important decisions are left on the sidelines until the new administration starts working. That is well into next year, so for the month of December, the market looks for direction in other places than the fiscal space.
We have seen what Powell’s testimony this week did. The markets rallied on Powell saying nothing new – the Nasdaq 100 index even managed to put a new all-time high. The expectations are that 2021 will be a reflation year, where fiscal and monetary stimulus combined will create a lower USD and higher stock market prices.
Before 2021, though, there are still some days left to trade in 2020. At this point, the current Dow Jones consolidation can break either way. Before buying, bulls must wait for a daily close above the upper, black trendline. Also, before selling, bears must wait for a break and a daily close below the lower, blue trendline, and ideally below the black one as well.
