The US market has been in a strong uptrend from the past 14-15 months. The performance of this US major index has a very high correlation to major global equity markets, both in the near term as well as long term. However, currently the Dow Industrials Avg index has started to show the first signs of mild reversal patterns. Dow Jones Industrials made a high of 35490 in Aug-21 and from there till last week the index had corrected back towards 33613 odd levels.
The index had formed a BEARISH WEDGE pattern on the daily chart, Bearish Wedge patterns are indicative that the prices continue to make a pattern of higher highs and higher lows. The low of this pattern had started to form in the month of JUNE-21 from a base level of 33300 odd for the DOW.
As we can see from the charts that this bearish wedge pattern was broken in the first week of SEPTEMBER, and started to correct on the downside. So far the correction has been about 2000 points.
Post this correction, last week the DOW jones INDU had given a minor rally. From 33613 to almost touching back to 34850 levels.
This level of 34850 is extremely crucial for DOW, because it forms a major resistance point of 61.8% of FIBONACCI count of retracement from the major highs of Aug to the lows tested last week.
61.8% retracement resistance are zones where the momentum fades away and markets get into a struggle mode yet again. These are also the points where the indices face selling pressure again and the bounce typically gets over.
This pattern indicates that if the Dow is above to surpass this resistance this week then there is a probability that the DOW could continue to outperform and even cross back above its previous high, something which is extremely BULLISH for the global equity markets.
On the other hand if the DOW fails to convincingly cross this mark, then there is a possibility that the last weeks recent swing low would get retested, leading to some profit booking in many global markets as well.
One thing is sure that its definitely going to be an Action packed week, and it seems that the outcome of the index in this week could have a significant bearing on the entire global equity markets over the near term atleast.