Goldman Weakness Sends Dow Toward 35066 – 34649 Target Zone

March E-mini Dow Jones Industrial Average futures fell sharply Tuesday as government bond yields hit COVID-era highs and after Goldman Sachs reported disappointing earnings.

Treasury yields posted strong gains after the cash market was closed Monday due to the Martin Luther King Jr. holiday. The closely watched 2-year yield broke above 1% for the first time since February 2020, the month before the pandemic declaration that sent the U.S. economy into recession. The 2-year Treasury is seen as a gauge of where the Federal Reserve will set short-term borrowing rates.

At 22:00 GMT, March E-mini Dow Jones Industrial Average futures are trading 35296, down 500 or -1.40%.

In stock related news, Goldman Sachs shares dropped nearly 7% on Tuesday after the bank missed analysts’ expectations for its fourth-quarter earnings. Goldman’s operating expenses surged 23% on increased pay for Wall Street employees.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through Tuesday’s low at 35135 will signal a resumption of the downtrend. The next main bottom is 34547.

A trade through 36390 will change the main trend to up. This is highly unlikely but due to the prolonged move down in terms of price and time, the market remains vulnerable to a closing price reversal bottom.

The main range is 33300 to 36832. Its retracement zone at 35066 to 34649 is the primary downside target area. This zone is controlling the near-term direction of the market. We could see a technical bounce on the first test of this area.

The new short-term range is 36832 to 35135. If there is a short-covering rally then its retracement zone at 35984 to 36184 will become the primary upside target.

Short-Term Outlook

The direction of the March E-mini Dow Jones Industrial Average early Wednesday is likely to be determined by trader reaction to 35296.

Bearish Scenario

A sustained move under 35296 will indicate the presence of sellers. This should lead to a quick test of 35135, followed by 35066.

Look for a technical bounce on the first test of 35066, but if it fails then look for the selling to possibly accelerate toward the Fibonacci level at 34649.

Bullish Scenario

A sustained move over 35296 will signal the presence of buyers. The first upside target is 35518. Overcoming this level could trigger a further rally into 35984 – 36184.