Index in focus: All eyes on 34K for Dow traders

After a solid day to start the week, the Dow Jones Industrial Average (Wall Street CFD) is gaining more ground today.

The proximate cause for this morning’s rally comes from the US consumer. Between a solid 11.6% y/y rise in Redbook’s weekly retail sales figure and strong results from both Walmart (WMT +5%) and Home Depot (HD +4%), traders are more confident that economic growth remains on sound footing, despite ongoing inflationary pressures.

As we go to press, the Dow is testing arguably its most important price level of the past year at 34,000. Looking at the chart below, the index consistently found support near 34K in July, September, October, November and January, and, once breaking below it, found resistance at that same level in March and May. This price action underscores the technical principle of polarity, which states that a previous support level, once broken, becomes future resistance and vice versa.

All told, the price action suggests that the 34K level is a critical bull/bear delineation point, so a confirmed break above 34K would strengthen the near-term bullish bias and potentially pave the way for a move back toward record highs around 37K later this year. Meanwhile, a strong reversal off the 34K zone that breaks the near-term bullish channel would suggest that the most-followed US index has yet to shake off this year’s bearish momentum and would point a deeper retracement back below 32K.

Source: StoneX, TradingView

Despite the lack of top-tier economic data and generally lower liquidity due to “Dog Days of Summer” trade, this week’s price action could nonetheless set the trading bias for US indices heading into September and beyond.

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

Open a Forex.com account, or log-in if you’re already a customer.
Search for the pair you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels.
Place the trade.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

Contracts for Difference (CFDs) are not available to US residents.

FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of Stonex Group Inc.

Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.

Know your advisor