Dow short recommendation remains intact

Price at time of writing – 16,168.

The 14-point gain on the Dow Jones since last week’s update disguises a week of increased volatility.

With the index closing yesterday at a level just beneath my key resistance – and former long-term target – of 16,175, my recommendation to sell the index remains intact.

In recent years, the US has succeeded in becoming largely self-sufficient in its energy needs, which means any disruption to global gas supplies will impact its economy less than Europe’s. This partially explains why Wall Street’s performance overnight was better than that of the European stock markets earlier in the day. Technically, today I’m making no change to the triggers I have already highlighted recently. The Dow still shows signs of fatigue at 16,175, but needs to break below 15,551 in order to confirm a more aggressive correction. A break below 15,551 would clear the way for the index to double its recent, initial fall of 6.25% to one of 12.5%.

Although a break below 15,551 is yet to occur, I am leaving my downside target of 14,515 unchanged. There is little in the way of support between these two levels, and a clean break could see the near-1000-point fall occur quite quickly.

Recommendation: sell or stay short. Target 14,515. Stop-losses can remain unchanged and be triggered on a break above 16,558.

Dow Jones chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.