DOW Continues Upwards Trajectory as XJO Struggles For Direction

Recorded by Tim Michaelides at 4:00pm on 24/5/2017

The chart that I have here is the chart of the XJO (The top 200 stocks of the Australian market). This is the index we look at to gain an overall view of the market. Today, the market has closed 9 points higher, as you can see we are coming to the edge of a triangle pattern thanks to a short term downtrend which has formed that we are now just starting to move against. 5800 is the key level we are looking towards, if it breaks to the upside, resistance becomes 5950. If it fails from here however, we would instead look towards 5680, and subsequently 5600. Overall, the market is in a bit of a channeling pattern that has been uptrending in the longer term. We can see this year it has moved mainly sideways with periods of upwards movement.

Last week we saw quite a significant fall, with volatility coming back into the market after a memo surfaced indicating President Trump may have tried to bully FBI director James Comey out of investigating Michael Flynn’s ties to Russia. This has lead to an investigation that could lead to Donald Trump being impeached. From this news, we saw the market fall quite quickly but not sustaining the movement for long. This could be due to the fact the investigation could take quite some time to actually show results. In the meantime, the main worry is whether the Trump government can pass tax reforms through congress.

Coming over to the U.S. market we are now looking at the chart of the Dow Jones. This index has been moving sideways for some time now, between resistance at 21,000 and support at 20,400. It has been struggling to move outside this channel for the majority of this year. In the last few days our market has disconnected from the U.S.  and has been moving sideways, whereas the DOW has moved higher for four consecutive days towards a key resistance level. If this level is broken, it can easily reach an all time. We are looking to see whether the U.S. market will continue its uptrend and move towards those highs or once again fail at resistance.

Key Market News

Australian Banks: The Australian market has been held back thanks to disappointing reports from the banks over the last few weeks. Additionally, the extra tax introduced in the budget has also helped push the banks lower, plus S&P ratings have downgraded their outlook on BOQ and Bendigo & Adelaide Bank which has also had an effect.

Investigation into Donald Trump: As mentioned earlier, the investigation into President Trump has brought some uncertainty into the market, but at this stage, markets aren’t quite reacting to the news strongly.

U.S Tax Reforms: We are still waiting to hear whether these reforms will be passed through.

If you would like to learn more about how we pick direction and the strategies we are using in the current market conditions, please join one of our free webcasts. Have a great week, thanks, and bye for now.

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