The Dow Jones has recorded a decline of 4.8% over the past two days, driven by concerns about the potential impact of US tariffs on the global economy. A bearish trend is indicated by daily studies, while weekly studies exhibit declining strength.
The breach of key supports at 40,214 and 40,000 suggests a move towards a deeper decline, with a weekly close below these levels signalling further downturn potential. The latest weakness confirms a double-top pattern on the weekly chart, increasing downside risk.
Technical Analysis and Market Trends
An immediate target is set at 38,708, with further breaks exposing 37,624 and 37,202. Resistance levels are identified in the 40,000 to 40,700 zone, which should restrain any upward movements.
That initial section outlines recent downward pressure on the Dow Jones, with a fall of nearly 5% in just two trading sessions. This kind of movement, particularly when tied to macroeconomic themes like tariff risks, tends to trigger broader revaluations in positions—especially those sensitive to cyclical flows. Here, we’ve seen evidence of technical breaches on both the daily and weekly charts, which gives more weight to the idea that this isn’t just short-term volatility.
When a major index like the Dow breaks through well-watched technical support levels, in this case 40,214 and 40,000, it tends to act as confirmation for short bias in the weeks ahead. The fact that it hasn’t yet re-engaged with those broken levels implies reduced confidence in a near-term bounce. Powell doesn’t need to speak for these charts to do the talking—markets seem to be adjusting to a more constrained environment, and the presence of the double-top on the weekly chart is typically one signal that longer-term exhaustion may already be in play.
From our perspective, the focus now turns to test targets below current levels. The 38,708 mark is lining up as an immediate magnet, and with little structural support between there and the 37,624 followed by 37,202 lows, any break there could push positioning into more defensive territory. These aren’t just numbers on a chart—the proximity of open interest around these levels tends to pull flows with them.
Market Strategy and Recommendations
For now, the resistance band that stretches from 40,000 to 40,700 can act as a ceiling—upside attempts within this range are likely to see selling pressure, particularly from those who missed the first leg down and are eyeing re-entry.
If dollar strength continues, spot downside pressure grows. With rates expectations adjusting at the margin, and tariffs capping global growth narratives, it’s difficult to justify a return to risk without a shift in broader sentiment.
As such, our working view should be positioned for into-strength selling opportunities in the resistance band, and to be wary of complacency around the 38,700 level. Friday closes will matter more from here—especially if the weekly is printing lower-highs alongside lower-lows. Watching how volatility behaves around key expiry levels could also give early indications of where committed flows are sitting. Limit orders below 38,200 could serve well if a flush comes abruptly. Patience might be tested, particularly if bounces feel persuasive.
