From the July low of 10,827 the index has attempted to cut through the Fibonacci 38% resistance level nine times and unless it can climb over this hurdle soon, we have a potential bearish setup.
Although we have stayed above the recent pivot low of 11,290 we still need to see strength come into the markets and with the summer holidays over we should really start to see higher volumes come into the markets now.
Technical indications still remain negative and with a triple RSI sell signal as well as the index below its 20 day moving average it remains to be seen if we will see a sharp September sell off. Keep in mind that September often sees declines rather than rallies and this may add pressure to the overall market.
The falling price of Crude Oil has also had no impact on the index and there has been an increase in the options market with a higher number of Put buyers which also suggest that sentiment is still pointing to expected falls.
The bulls are going to have a tough time against the bears over the coming weeks and will need to take the Dow Jones above 11,715 very soon to target the 11,982 area. A break below 11,375 for the coming week could see the bears come in and push the index lower towards 11,347 – 11,290.
As indicated previously, a Fibonacci turning point is evident during September and November. If we see a cross reference of Time Meeting Price then a surprise rally may be at hand and send the bears scrambling to cover their short positions.
Until we can break out of the current trading range of 11,710 – 11225 we remain in a sideways mode for the time being.
Sandy Jadeja is Chief Market Strategist for ODL Markets and founder of www.Spreadbettingtowin.com where he teaches low risk trading strategies and money management.