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The Dow Jones Industrial Average moved to a new all-time record high last Friday after the Non-farm Payrolls job report, alongside other key indices such as the Nasdaq, S&P 500 and Russell 2000.
Traders have now woken up to the news that the Biden administration finally passed the massive US infrastructure bill into law, following months of speculation and negotiations.
With the new piece of bullish news the Dow Jones Industrial Average has a clear choice. Either the DJIA is going to continue to rally to new record or pullback on buy the rumour and sell the fact.
If a pullback does occur this week, then the 35,000 level would be a premium spot to looking for the DJIA to reverse and head back to new record highs. I suspect the 40,000 level could be a year-end target.
Should we see the DJIA, and the broader market just continue to head higher than the 37,000 level is a possible weekly target for the DJIA. We should also pay close attention to crude oil’s reaction, as rising crude oil prices is a big driver of market sentiment.
Speaking of market sentiment, the mood towards the Dow Jones Industrial Average was extremely bearish last week as the DJIA rallied. This is a big shift from the start of the month, when 78 percent of traders were bullish towards the DJIA.
The ActivTrader Market Sentiment tool currently shows that some 65 percent of traders are currently bearish towards the DJIA. I feel more losses are possible since retail traders are often on the wrong side of the market and have poor market timing.
Dow Jones Industrial Average Short-Term Technical Analysis
The four-hour time frame continues to show that a bullish breakout has happened from a large falling broadening expanding wedge pattern. These patterns are typically amongst the most bullish reversal patterns as I have been mentioning.
Any pullback towards the 35,000 level or slighty under should be a huge buying opportunity this week. This would be a complete test of the wedge pattern, which holds an upside target of 3,000 points.
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Dow Jones Industrial Average Medium-Term Technical Analysis
Looking at the weekly time frame, the trend is still very bullish, and the bigger picture continues to show that massive, inverted head and shoulders pattern that has yet to reach its target.
According to the overall size of the bullish price pattern the DJIA could be ready to rally towards the 39,600 area or the medium-term, and maybe even the 40,000-resistance level.
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