Technical Top May be Forming in Markets
Failure in markets to continue rising amid better-than-expected readings in fundamental data may be a clear sign that strong expectations are already priced in. Crude oil has fallen to nearly $70 a barrel from resistance at $75 and the US dollar has, in the past five days, begun to show strength against major crosses. Also seeing concern, gold prices have fluctuated wildly in recent days while the Baltic Dry Index, a measure of shipping costs and trade, has continued to plummet its the lowest level in more than two months. Elsewhere, US equities have seen mixed movement that could be a sign of a top formation in markets.
Dow30 Five-day Chart
Intra-day movement in the past few days has seen the Dow fluctuate between gains and losses, with very near-term support just below 9500. A long-legged doji formed on Monday following the rally seen on Friday, signalling that uncertainty is high. The index is now nearly 50% above its March lows and peaked with a 19% move since the July 8 bottom. A fibonacci retracement of 50% from here at around 8,850, a drop of approximately seven percent, could mark an area of support against further declines as the market previously saw resistance in that region through the early part of June.
Dow30 Daily Chart