E-mini Dow Jones Industrial Average (YM) Futures Analysis – Crossed to Bullish Side of Contract’s Retracement Zone

Limited exposure to the FAANG technology stocks is helping to underpin the Dow E-mini futures contract early Thursday, while the brunt of the early selling pressure is being felt by the tech-driven NASDAQ Composite and the benchmark S&P 500 Index.

At 0741 GMT, September E-mini Dow Jones Industrial Average futures are trading higher at 25433, up 30 or +0.12%.

Dow traders seem to be rejoicing in the favorable outcome of the trade talks between the United States and the European Union at which both parties agreed to lower tariffs. After the story broke on Wednesday, the major indexes soared with the Dow hitting its best level since March 12.

At the conclusion of his talk with European Commission President Jean-Claude Juncker, President Trump said they had agreed to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.”

In other news, after the closing bell on Wednesday, Facebook announced disappointing quarterly earnings results. This led to a massive sell-off in its stock during the after-hours session. Other big technology stocks are also getting hit by a wave of selling pressure. Apple lost about 1 percent. Amazon, which reports after the bell Thursday, lost 2.3 percent. Netflix, which disappointed investors last week, was down about 3 percent in the after-hours market. Finally, Google parent Alphabet fell 2.4 percent.

As far as exposure is concerned, the two largest technology stocks in the Dow Jones Industrial Average are Apple and Microsoft.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Wednesday when buyers took out the June 11 top at 25418. Today’s early move to 25470 signals the buying is strengthening.

A trade through 24912 will change the main trend to down.

The main range is 26672 to 23178. This is also the contract range. Its 50% to 61.8% retracement zone is 24925 to 25337. This zone is controlling the longer-term direction of the Dow. The trade on the strong side of this zone today is helping to support the upside bias.

Daily Swing Chart Technical Forecast

Based on the early trade, the direction of the September E-mini Dow Jones Industrial Average futures contract is likely to be determined by trader reaction to yesterday’s close at 25450.

A sustained move over 25450 will indicate the presence of buyers. If this continues to generate upside momentum then look for a possible test of the March 12 swing top at 25868. This is followed by the February 27 main top at 25868.

Posting the higher-high then breaking back under yesterday’s close at 25450 will signal the presence of sellers. This will also put the Dow in a position to form a potentially bearish closing price reversal top.

If sellers were to pressure the Dow under 25450, we could see a test of the major Fibonacci level at 25337. Crossing to the weak side of this level will indicate the selling is getting stronger. This could trigger a steep break into the 50% level at 24925, followed closely by the main bottom at 24912.

Look out to the downside if 24912 fails as support.

Longer-term traders should look at it this way, bullish over 25337, bearish under 24925.