Dow Jones Forecast: The DJIA Loses Ground Ahead of the NFP Release

• The Dow Jones (DJIA) has broken below the 50-period SMA at the 43,000-point level, raising the possibility of a new short-term bearish trend.

   

• Low employment expectations have increased market indecision and intensified bearish pressure ahead of the NFP release.

Dow Jones dropped over 2% during the last trading week, falling from the peak of 43,400 recorded in late December 2024. Selling pressure remains stable as the market anticipates an economic slowdown in the U.S. and a weaker update in employment data expected to be released tomorrow.

Non-Farm Payrolls (NFP)

The key monthly data (NFP) is due tomorrow at 8:30 am EST, with an anticipated average increase of 160,000 jobs in December, below the 227,000 jobs reported in November. The official unemployment rate is expected to remain at 4.2% for December, the same as recorded in November 2024.

The crucial point is that the market currently anticipates a decline in employment growth for the last month of 2024. However, if the data significantly exceeds the expected 160,000 jobs, this could be interpreted as a strong signal of economic stability to start the year. Such scenario could align with the Fed's perspective of keeping rates stable, which would counter bullish prospects for the Dow Jones and potentially reinforce long-term bearish pressure.

It is important to note that employment growth throughout 2024 have been mostly declining. In February, a solid figure of 353,000 new jobs was reported, but the numbers began to decline consecutively throughout the year, culminating in a notably low figure released in November, with just 12,000 new jobs created.

NFP Trend 2024

Source: ForexFactory

This indicates that the U.S. has experienced a significant reduction and lack of consistency in job creation, which in the long term implies weaker total consumption within the country, leading to lower sales and profits for American companies. These events have raised concerns about an internal economic slowdown in the U.S., contributing to growing indecision and increasing bearish pressure on the Dow Jones at the start of the year.

Technical Forecast for the Dow Jones (DJIA)

The DJIA has attempted to establish a new bearish trend that began in early December 2024, from the peak level of 45,000 points. Currently, the price has stabilized around key support zones (42,300), but uncertainty ahead of the employment data release has maintained bearish pressure in recent sessions.

Source: StoneX, TradingView

• Potential Trendline: Bearish momentum has been evident in much of the price action over the past few weeks. A tentative downtrend can now be drawn, supported by the lower highs presented by the Dow Jones. Although the price has crossed below the 50-period SMA, the 100-period SMA remains the primary obstacle for bearish movements. If the support level at 42,300 points is breached, the new trendline could extend under increased selling pressure.

   

• TRIX: The TRIX indicator line has consistently oscillated below the 0 level, suggesting that the average movement of exponential moving averages has been declining in the short term. This highlights bearish dominance in the Dow Jones price. As the TRIX line moves further below the neutral 0 level, bearish moves could accelerate, amplifying selling pressure.

   

• Key Levels:

• 43k points: The nearest resistance level, corresponding to correction levels from December and November. Oscillations above this level would negate a potential bearish trend and open the door to possible lateral movements in the Dow Jones.

   

• 42k points: A nearby support level that aligns with the natural barrier of the 100-period SMA. Movements below this level could consolidate bearish momentum and establish a potential short-term downtrend.
  
  

• 40k points: A crucial support level for future Dow Jones movements. Oscillations near or below this level could pose a significant threat to the long-term uptrend that the index maintained through much of 2024, handing control to bearish forces.