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Will US Elections Give Dow Jones Industrial Average Direction?

Will US Elections Give Dow Jones Industrial Average Direction?

by Jeremy WagnerNovember 7, 2016

Talking Points

-Dow Jones Industrial Average remains stuck in a 2 month sideways range

-200 day simple moving average has provided support if at least temporarily

-Track the resistance trend line to define the near term trend

On Tuesday November 8, the United States heads to the polling booths to cast their vote for the next president. Dow futures are up strongly this morning by 1.3%. Was this strength in DJIA due to the FBI clearing the recently discovered Clinton emails or because of a technical bounce of a commonly watched moving average?

We may never know for sure. However, we can analyze the technical picture of Dow Jones Industrial Average and see it has been trading sideways while holding above the 200 day simple moving average (SMA).

Technical trading allows us to see how the market is behaving and can provide and early warning signal to strength and weakness. Additionally, technical tools help us enter and exit trades.

A couple of things to note on the chart below, prices have generally held above the important 200 day SMA for the past 8 months. The 200 day SMA is widely followed by many traders and institutions. Therefore, a break down below 17,570 could lead to an accelerated sell off as traders and institutions see the break down as a sign of further weakness.

Dow Jones Industrial Average Direction

Suggested Reading: Quarterly forecast for equities

Since prices have broken below the grey dotted line on October 11, this leads to an increased probability of a sell off towards the June low near 17,000.

As a result, as long as prices are below the blue resistance line (currently crossing near 18,275), then consider DJIA to be in a state of weakness.

Suggested Reading/Viewing:

Beginner Elliott Wave Trading Guide (click on the beginner panel)

—Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

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