March E-mini Dow Jones Industrial Average futures are inching higher late in the session on Tuesday. The blue chip index has diverged from the S&P 500 and NASDAQ Composite indexes, which is a potentially bearish signal.
The closing price reversal top from January 10 was also confirmed earlier in the session, shifting momentum to the downside. However, there wasn’t much of follow-through to the downside.
The reason for the divergence is the strength in the technology sector. The S&P 500 Index and NASDAQ Composite are more heavily weighted in tech stocks than the Dow. Technology stocks have been the best performers this year.
At 20:05 GMT, March E-mini Dow Jones Industrial Average futures are trading 28915, up 45 or +0.15%.
Daily Technical Analysis
The main trend is up according to the daily swing chart. However, momentum has shifted to the downside with the formation of the closing price reversal top on January 10 and its subsequent confirmation earlier today.
A trade through 29022 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 28084 will change the main trend to down.
The short-term range is 28084 to 29022. If the selling pressure continues then look for the selling to extend into its retracement zone at 28533 to 28442.
The nearest upside target is the closing price reversal top at 29022. Overtaking this level could lead to a test of an uptrending Gann angle at 29089. Overtaking this angle will indicate the buying is getting stronger. This could trigger a further rally into the next uptrending Gann angle at 29187. Crossing to the strong side of this angle will put the Dow in an extremely bullish position.
The daily chart indicates there is plenty of room to the downside, but it’s going to take a combination of fresh shorting and long liquidation to trigger an acceleration to the downside through Tuesday’s intraday low at 28737.
If the selling pressure increases enough to take out 28737 with conviction then look for the move to extend into the short-term 50% level at 28533. Look for a technical bounce on the first test of this level.
If 28533 fails as support then look for a further break into an uptrending Gann angle at 28451, followed by the short-term Fibonacci level at 28442.
This article was originally posted on FX Empire
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