James Hyerczyk
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E-mini Dow Jones Industrial Average

June E-mini Dow Jones Industrial Average futures are trading sharply lower shortly after the cash market close on Wednesday after stronger-than-expected inflation data stoked worries of tighter monetary policy to combat what many investors fear could be a prolonged period of inflation.

Home Depot Inc was the biggest loser, dropping 4.131%. Honeywell International Inc lost 3.98% and Boeing Company was down 3.539%.

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Microsoft Corp was the biggest loser in the technology, dropping 2.936%. Intel Corp lost 2.58% and Apple Inc gave up 2.494%.

At 20:43 GMT, June E-mini Dow Jones Industrial Average futures are at 33468, down 715 or -2.09%.

In response to the biggest jump in consumer prices in 12 years, U.S. money markets moved fully to price in a 25 basis point interest rate hike by December 2022, while the yield on 10-year Treasury notes surged to a two-week high of 1.690%.

Daily June E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down late in the session when sellers took out the swing bottom at 33572. A move through 35000 will change the main trend to up.

The selling started on Monday with the formation of a closing price reversal top. This is a bearish chart pattern that often leads to a 2 to 3 day correction. Today is the second day down.

The short-term range is 31951 to 35000. Its retracement zone at 33476 to 33116 is the primary downside target. The Dow is currently trading at the upper or 50% level at 33476.

There is also a gap on the daily chart at 33157 to 33060. This was formed on April 5. This area is also a potential downside target. The lower or Fibonacci level at 33116 falls inside the gap.


Short-Term Outlook

Trader reaction to 33476 to 33116 will set the tone on Thursday. From a bullish perspective, we could also see a closing price reversal bottom following a test of this area.

If 33116 fails then prepare for an acceleration to the downside with the next major target coming in at 31951. But make adjustments if the Dow starts to come back into the retracement zone.

Markets seldom go straight down. The first leg down is usually long liquidation. Then there is a 50% to 61.8% snapback rally. Following this retracement, traders make the decision to go short or play for a new high.

For a look at all of today’s economic events, check out our economic calendar.
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