E-mini Dow Jones Industrial Average (YM) Futures Analysis – Needs Better Volume to Support a Breakout
September E-mini Dow Jones Industrial Average futures closed lower on Thursday after failing to take out the contract high at 21628 for a fourth session. According to all reports, earnings season is looking good, but investors haven’t been able to take out last week’s high.
Last week’s rally was fueled by concerns about muted inflation from Fed Chair Janet Yellen and disappointing consumer inflation and retail sales data. Both events point towards the Fed refraining on further rate hikes this year. This story is still out there and likely helping to underpin the market.
The current chart pattern suggests that Dow investors are waiting for a catalyst to send it higher. Investors seem to be hesitant to chase this market higher after mixed results from key Dow components Goldman Sachs and IBM earlier in the week.
There is not much to say about the market from a technical perspective. The current set up suggests we are in a news driven market and that the Dow is being driven by momentum.
A sustained move over 21628 will signal a resumption of the uptrend. Buying volume must continue to increase on the move or the rally will fail.
If the volume is light on the breakout then watch for a possible closing price reversal top.
The short-term range is 21628 to 21416. Its 50% level or pivot is 21522. This price has provided support the last two days. It could be a trigger point for an acceleration to the downside.
The intermediate range is 21226 to 21628. Its retracement zone is 21427 to 21380. This zone stopped the break on Wednesday when the Dow made its low for the week at 21416.
The main retracement zone is 21287 to 21234.
We’re going to have to take the Dow one price bar at a time. Therefore, we’ll play the breakout theory, provided we get better-than-average volume. Anything less will hurt the success rate of a breakout.
Look for an upside breakout on a sustained move over 21628. Sustained in this case means that when the Dow breaks out over this price, it doesn’t look back.
Watch for a downside breakout on a sustained move under 21522. The same rule holds. Once broken, we don’t want to see the market back move above it.
It may seem like a lot to ask for, but it’s necessary to have the filter. Otherwise, we’re likely to get chopped up in a two-sided trade.
This article was originally posted on FX Empire
