E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Reversal Top Could Fuel Momentum Shift

September E-mini Dow Jones Industrial Average futures are trading lower late Tuesday, putting the market in a position to post a potentially bearish closing price reversal top. A similar pattern also formed in the cash market. The catalyst behind the price action is the hotter-than-expected inflation report that overshadowed a strong start to second-quarter earnings season earlier in the session.

At 20:44 GMT, September E-mini Dow Jones Industrial Average futures are trading 34795, down 80 or -0.23%.

The late sell-off in the blue chip index came as the 10-year U.S. Treasury yield jumped more than 4 basis points, or 0.04%, and crossed the 1.4% level in a delayed reaction to the latest numbers on inflation.

Inflation rose at its fastest pace in nearly 13 years, the Labor Department reported Tuesday. The consumer price index (CPI) increased 5.4% in June from a year ago; economists surveyed by Dow Jones expected a 5% gain. Core CPI, excluding food and energy, jumped 4.5%, the sharpest move for that measure since September 1991 and well above the estimate of 3.8%.

In other news, Dow component JPMorgan Chase lost 1.5% even after posting second-quarter earnings of $11.9 billion, or $3.78 per share. Another constituent, Goldman Sachs, edged lower by 1.2% after the firm reported second-quarter earnings of $15.02 per share, topping analysts’ expectation of $10.24 earnings per share. Additionally, Boeing fell about 4.2%, weighing on Dow sentiment.

Daily Swing Chart Technical Analyst

The main trend is up according to the daily swing chart, however, the formation of a closing price reversal top could threaten to shift momentum to the downside, leading to the start of a 2 to 3 day correction, or even a change in trend if the selling pressure is strong enough.

A trade through the intraday high at 34915 will signal a resumption of the uptrend, while a trade through 34004 will change the main trend to down.

A close under 34875 will form a closing price reversal top. If confirmed, momentum will shift to the downside, setting up the possibility of a 2 to 3 day break.

The minor range is 34004 to 34915. Its 50% level at 34460 is the first downside target. Since the main trend is up, buyers are likely to come in on a test of this level.

The short-term range is 32902 to 34915. If the main trend changes to down then look for the selling to possibly extend into its retracement zone at 33909 to 33671.

Short-Term Technical Outlook

The direction of the September E-mini Dow Jones Industrial Average into the close on Tuesday is likely to be determined by trader reaction to 34875.