E-mini Dow Jones Industrial Average (YM) Futures Analysis – March 17, 2016 Forecast

The June Dow Jones Industrial Average futures contract surged on Wednesday after the U.S. Federal Reserve kept interest rates on hold and pulled back its expectations for future rate hikes.

The Dow rallied to its highest level since December 31 and is now trading higher for the year after the Fed scaled back its expectations for the path of interest rate hikes in 2016. The central bank kept its target range for the benchmark federal funds rate at between 0.25 percent and 0.5 percent, which it has remained since December, when interest rates rose for the first time since 2006, ending a zero interest rate policy in place since the global financial crisis.

Additionally, the “dot graph”, which tracks the expectations of rate hikes by Fed members, now implies that the Fed is now expecting two rate hikes this year as opposed to four it had forecast in December.

In its accompanying statement the Fed said “global economic and financial developments continue to pose risks” on the recovery of the U.S. economy in light of global market turmoil in the first three months of this year.

Today’s dovish Fed message, coming in the wake of strong dovish signals from the Bank of Japan and the European Central Bank, should underpin risky assets like the E-mini Dow Jones Industrial Average in the coming days, if not weeks.

Technically, the main trend is up according to the daily swing chart. With the main bottom at 16339, the Dow is in no danger of changing its trend to down, but it is in the window of time for a potentially bearish closing price reversal top. If this chart pattern forms then we can anticipate a 2 to 3 day correction. This pattern would actually be constructive for the market because it would alleviate some of the overbought pressure.

Based on yesterday’s close at 17236, the Dow is in a position to continue the rally with the next target a long-term downtrending angle at 17356. This is the last major angle before the 17572 main top.

If there is selling pressure then look for a possible break into a pair of angles at 17140 and 17107. Crossing to the weak side of the uptrending angle at 17107 will put the Dow in a bearish position. It will also make the Dow vulnerable to a steep sell-off since the next major support doesn’t come in until 16723.

Look for an upside bias as long as the Dow can sustain a rally over 17287. A downside bias and a potential closing price reversal top could develop on a sustained move under this price.