E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Forms Bearish Closing Price Reversal Top

December E-mini Dow Jones Industrial Average futures are trading sharply lower late Tuesday after reversing earlier gains. The sell-off started after President Donald Trump said he was calling off negotiations with Democratic lawmakers on coronavirus relief legislation until after the election.

The surprising news sent shockwaves through the stock market, which had been moderately higher, as hopes for further fiscal stimulus had been helping to prop up the market for several days.

At 20:40 GMT, December E-mini Dow Jones Industrial Average futures are trading 27628, down 367 or -1.31%. The high of the session is 28232 so we’re looking at a 600 point plunge.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but today’s price action suggests momentum may be getting ready to shift to the downside. Today’s rally to 28232 stopped just short of the last main top at 28251. A trade through that level would’ve changed the main trend to up.

Instead, a closing price reversal top is forming on the eighth day up from the last main bottom. If confirmed this could trigger a two-to-three day break or a 50% to 61.8% correction of the last rally from 26407.

The minor trend is up. This is controlling the momentum. A trade through 27109 will change the minor trend to down. This chart pattern will be further confirmed if the minor bottom at 27039 also fails as support.

The short-term range is 29050 to 26407. Its retracement zone at 27729 to 28040 was the primary upside target. The market exceeded this zone earlier in the session on Tuesday, but is set to close below it, turning it into resistance.

The minor range is 26407 to 28232. Its retracement zone at 27320 to 27104 is the primary downside target. We could see a technical bounce on the first test of this area, but if it fails then look for the selling to possibly extend into the main 50% level at 26714.

Short-Term Outlook

In an early look at Wednesday, based on the closing price reversal top chart pattern, a trade through Tuesday’s low will confirm the potentially bearish chart pattern. At a minimum, this should lead to a test of 27320. Watch for a bounce.

If this level fails then look for the selling to possibly extend into the first minor bottom at 27109, followed by 27104 and another minor bottom at 27039. This is a potential trigger point for an acceleration to the downside with 26714 the next major target.

Given the reversal top chart pattern, buyers could retest 27729 to 28040, but they are going to have a hard time overcoming this area.

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