E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – In Position to Test 15-Month Bottom

CSeptember E-mini Dow Jones Industrial Average futures are down sharply at the mid-session on Monday. The selling is being driven by fears that the Federal Reserve’s aggressive interest rate hikes would tip the economy into recession.

Friday’s hotter-than-expected inflation print is prompting traders to price in a total of 175 basis points (bps) in interest rate hikes by September.

At 16:49 GMT, September E-mini Dow Jones Industrial Average futures are trading 30733, down 626 or -2.00%. The SPDR Dow Jones Industrial Average ETF (DIA) is at $308.17, down $6.20 or -1.97%.

Yield Curve Inverts

The two-year 10-year US Treasury yield curve briefly inverted for the first time since April. Many market participants see this as a reliable signal that a recession could come in the next year or two.

Investors Eyeing Federal Reserve Monetary Policy, Interest Rate Decisions

The U.S. Federal Open Market Committee (FOMC) begins its two-day meeting on Tuesday. On Wednesday, the FOMC is widely expected to announce a 50-basis-point rate hike. However, the speed and scale of rate hikes that policymakers believe will be needed to quash red-hot inflation will be the focus.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down earlier on Monday when sellers took out the previous swing bottom at 30574. A trade through 33255 will change the main trend to up.

The minor range is 33255 to 30453. Its retracement zone at 31854 to 32185 is the nearest resistance area. This zone will move lower if sellers take out 30453.

The short-term range is 35405 to 30453. Its retracement zone at 32929 to 33513 is controlling the near-term direction of the index.

Daily Swing Chart Technical Forecast

Trader reaction to 3900.50 is likely to determine the direction of the September E-mini Dow into the close on Monday.

Bearish Scenario

A sustained move under 3900.50 will indicate the presence of sellers. Taking out the intraday low at 30453 will indicate the selling pressure is getting stronger. Consequently, this could trigger a further break into the March 4, 2021 main bottom at 29987. Furthermore, if this level fails to hold then look for the selling to possibly extend into the February 2, 2021 main bottom at 29027.

Bullish Scenario

A sustained move over 3900.50 will signal the presence of buyers. This will put the index in a position to form a potentially bullish closing price reversal bottom.

Confirming the chart pattern, could trigger a surge into the minor retracement zone at 31854 – 32185.