E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – May Be Setting Up for Reversal Top

June E-mini Dow Jones Industrial Average futures are edging lower shortly before the cash market opening on Tuesday, as surging oil prices fanned fears of further acceleration in global inflation, forcing the U.S. Federal Reserve and other major central banks to keep raising interest rates.

Investors are showing little response to signs that China’s economic pain may be abating amid easing COVID-19 curbs and focused instead on the inflation outlook, as Brent crude futures rallied above $123 a barrel, a two-month high, and a Fed governor backed further interest rate hikes to tame prices.

At 11:17 GMT, June E-mini Dow Jones Industrial Average futures are trading 33015, down 143 or -0.43%. On Friday, the last active trading session before Monday’s U.S. bank holiday, the SPDR Dow Jones Industrial Average EFT (DIA) settled at $332.12, up $5.67 or +1.74%.

Bearish Factors Weighing on Investor Sentiment

Crude oil prices could be looking at further upside action as the European Union’s decision to slash Russian oil imports, high U.S. summer driving demand and the easing of Chinese lockdowns could contribute to an already tight global crude supply. High oil prices are likely to keep the upside pressure on inflation, one of the main reasons stocks have fallen this year.

In the U.S., more hawkish talk from a Fed official on Monday dampened the notion the Fed could ease raising rates in September. This was one of the reasons for last week’s rally. With U.S. inflation running more than three times the 2% goal, Fed Governor Christopher Waller yesterday advocated 50 basis-point rate hikes until there was a “substantial” reduction in inflation.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 33434 will signal a resumption of the uptrend. A move through 30585 will change the main trend to down.

The main range is 36708 to 30585. Its retracement zone at 33647 to 34369 is the next major upside target and potential resistance.

The short-term range is 30585 to 33434. Its retracement zone at 32010 to 31673 is the nearest downside target. Since the main trend is up, buyers could come in on the first test of this area.

Daily Swing Chart Technical Forecast

Trader reaction to 33158 is likely to determine the direction of the June E-mini Dow Jones Industrial Average on Tuesday.

Bullish Scenario

A sustained move over 33158 will indicate the presence of buyers. A trade through 33434 will indicate the buying is getting stronger with the 50% level at 33647 the next target.

Aggressive counter-trend sellers could come in on the first test of 33647. Overcoming this level, however, could trigger a surge into the main top at 34027, followed by the Fibonacci level at 34369.

Bearish Scenario

A sustained move under 33158 will signal the presence of sellers. If this move generates enough downside momentum then look for a possible acceleration to the downside with 32010 to 31673 the next target area.

Side Notes

A close under 33158 will form a potentially bearish closing price reversal top. If confirmed, this could lead to the start of a 2-3 day correction with 32010 the minimum downside target.

If this doesn’t form today then look for the rally to possibly extend into the retracement zone at 33647 to 34369. This is 50% to 61.8% of the contract range. Sellers usually come in when this area is tested.