Dow Jones technical analysis | DJ remains bullish above 34 023

BY Janne Muta

|September 5, 2023

This Dow Jones technical analysis article provides an in-depth technical analysis of the DJ CFD, a derivative that follows the Dow Jones Industrial Average (DJIA). DJIA is a price-weighted index comprising 30 large, blue-chip stocks listed on the New York Stock Exchange.

The analysis is segmented into various time frames—weekly, daily, and 4-hour charts—to offer a comprehensive view of the market conditions.

Key technical indicators such as the Stochastic Oscillator, Simple Moving Averages (SMA), and Fibonacci levels are employed to gauge the market sentiment. The article also identifies pivotal market structure levels and their implications for traders and investors.

Whether you are bullish or bearish on the DJIA, this analysis offers valuable insights into the index's potential future movements. The next key risk events for this market are the ISM Services PMI data release tomorrow and Unemployment Claims on Thursday.

DJIA overview

Here’s a quick overview of the Dow Jones Industrial Average (DJIA) for those readers who would like to take the Dow Jones technical analysis to a deeper level and study the trends in the underlying stocks and sector indices. DJIA is one of the oldest indices in the world.

Index was created in 1896 by Charles Dow, the founder of Dow Jones & Company. It is a price-weighted index of 30 large, blue-chip stocks traded on the New York Stock Exchange. The DJIA is the most widely followed stock market index in the world.

The index comprises of large, well-established companies with a long history of profitability. They are also leaders in their respective industries.

The biggest stocks in the index and the sector weighting

Here’s a list of the top five stocks with their current weighting in the index.
· UnitedHealth Group (UNH): 9.01%
· Home Depot (HD): 6.30%
· Microsoft (MSFT): 6.22%
· Goldman Sachs (GS): 6.19%
· Caterpillar (CAT): 5.42%

While Nasdaq is known for its heavy emphasis on technology, the DJIA is a more diversified index with the most substantial weightings in financials (19.7%) and health care (19.1%). Technology comes in third with an 18.5% weighting. Although the DJIA is often considered an index for industrial stocks, their weighting ranks fourth at 15.2%.

The remaining index weighting is distributed among Consumer Discretionary (13.5%), Consumer Staples (7.6%), Energy (3.1%), Communication Services (2.3%), and Utilities (1.0%).

Dow Jones technical analysis

Dow Jones technical analysis, Weekly Chart

Weekly Dow Jones technical analysis

The weekly Dow Jones technical analysis shows the market in an uptrend. The market is making higher highs and higher lows indicating that investors and traders alike are bullish on Dow 30 stocks.

After the latest higher swing point (34 023) created two weeks ago, the index has rallied and created a bull candle (a wide-bodied candle). Note that the market attracted buyers near the SMA (20) and the order of the moving averages is bullish (the fast SMA > the slow SMA). At the same time, the Stochastic Oscillator is about to give a buy signal.

These indications support the bullish case for the index. Dow Jones technical analysis does, however, reveal a bearish indication also. The market has not been able to rally above a market structure level (34 931). In order for the rally to convert more bears into bulls (to increase the money flows in the long side) we need to see continued strength and proof that the bulls are in charge.

If the market can either create a higher reactionary low above 34 023 or gain momentum above 34 931, we might see the July high (35 686) tested. Alternatively, a break below 34 023 would reverse the recent uptrend and possibly move the market down to 32 820 or so.

This is a measure move target given by the distance from last week’s high to the low two weeks ago (34 023). A break below this low would create a lower swing high and move the market below the rising trend line support. This would change the market structure from bullish to bearish.

Dow Jones technical analysis, Daily Chart

Daily Dow Jones technical analysis

The daily Dow Jones technical analysis reveals some weakness at the 23.6% Fibonacci level. The level coincides roughly with the market structure level discussed above in the weekly Dow Jones technical analysis.

There is another market structure level (35 000) here in the daily chart that again coincides with the 23.6% Fibonacci level, making the 34 931 – 35 000 range an important confluence area. No wonder the bulls took this opportunity to offload some of their longs and take profits after a strong four-day rally.

The long wicks in the daily candles show the intraday rallies were sold over the last few days. The Stochastics oscillator is pointing lower and the fast SMA (20) is about to cross below the slow SMA (50) indicating potential weakness ahead. Note, however, that there are a couple of market structure levels nearby (34 645 and 34 692).

The bears need to push the market below this level in order to make more money on the short side. If there’s some decisive selling below this range, we might see the rising trendline support (currently at 34 250) tested.

Dow Jones technical analysis, 4h Chart

4h Dow Jones technical analysis

The 4h chart shows how DJ has created two lower highs while the support level is fairly close to the market structure area discussed in the daily Dow Jones technical analysis section above. Thus, the market is trading inside a triangle formation.

If it is resolved to the downside the projection revealed by the triangle width (a measure move) points to 34 466. Measured move targets are often the first targets the market moves to after a breakout.

Therefore, if the target is reached and we see further weakness the fact that the market has reached a target is by no means an invitation to go long the market. Always trade what you see in the price action. If the triangle formation is resolved to the upside, look for a move to 35 096. ­­­­

Client sentiment graph (Dow Jones technical analysis)

Client sentiment analysis

Most of the TIOmarkets' clients are bullish on DJ with 73% of the client base holding a long position while 27% of clients are betting the market will fall.

Please remember that the retail trader client sentiment is a contrarian indicator as most of the retail traders are on average betting against the market trends. This is why, experienced traders tend to trade against the retail client sentiment. You can follow the TIOmarkets client sentiment live on our Forex dashboard.

Inline Question Image

The Next Main Risk Events

  • GBP - Monetary Policy Report Hearings
  • CAD - BOC Rate Statement
  • CAD - Overnight Rate
  • USD - ISM Services PMI
  • AUD - Trade Balance
  • AUD - RBA Gov Lowe Speaks
  • CHF - Foreign Currency Reserves
  • USD - Unemployment Claims
  • CAD - Ivey PMI
  • USD - FOMC Member Harker Speaks
  • CAD - BOC Gov Macklem Speaks
  • CAD - Employment Change
  • CAD - Unemployment Rate
  • CNY - CPI
  • CNY - PPI

For more information and details see the TIOmarkets economic calendar.

DISCLAIMER TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyzes and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval. FX and CFDs are leveraged products. They are not suitable for every investor, as they carry a high risk of losing your capital. Please ensure you fully understand the risks involved. All the prices in this report are CFD prices based on price charts provided by TIOmarkets unless otherwise stated.

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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