Konstantin Kaiser•Sunday, January 19, 2025•3 min read
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President-elect Donald Trump takes office on Jan. 20, 2025. With only one day away, what is the up- and downside for DJI and SPX?
After A Bearish December; Could January Bring A Bullish Reversal For DJI?
The DJI corrected by approximately 7% in December, continuing its downward trend. If this downside persists, the index encounters critical Fibonacci support levels at 40,220 and 37,000. Notably, the MACD histogram has been progressively ticking lower over the past two months, signaling a bearish bias. However, the MACD lines are still bullishly crossed, suggesting a potential upside shift remains possible.
Additionally, the RSI remains in neutral territory, leaving room for further downside or a potential bounce. Should the correction extend, a rebound from the 0.382 Fibonacci support at 40,220 appears plausible, marking a key area to watch for a reversal.
DJI Presents Additional Downside Of Roughly 5 %
The Dow Jones Industrial Average (DJI) presents potential additional downside of approximately 5%, should the corrective movement continue toward the 0.382 Fibonacci support at 40,220. Before reaching this level, significant support from the 50-week EMA at 40,784 could slow or halt further declines.
The technical indicators offer a mixed outlook. The MACD histogram is in a clear downtrend, and the MACD lines have crossed bearishly, reinforcing the bearish momentum in the short term. However, the RSI remains in neutral territory, signaling that the index is neither oversold nor overbought, leaving room for movement in either direction.
Additionally, the EMAs present a more optimistic medium-term perspective. The golden crossover of the EMAs, where the shorter-term moving average has crossed above the longer-term one, confirms the overall trend as bullish, suggesting that any near-term pullback could still occur within the broader uptrend.
What is The Immediate Upside For DJI?
The immediate upside for the Dow Jones Industrial Average (DJI) looks promising based on the daily chart indicators. The EMAs have established a golden crossover, which confirms a bullish trend in the short to medium term. In addition, the MACD lines are poised for a potential bullish crossover, as the histogram has been ticking higher for the past few days, signaling increasing bullish momentum.
The RSI remains in neutral territory, indicating that there is room for upward movement without the index being overbought. Should the DJI begin an upward move, the next key Fibonacci resistance levels to watch are at 43,068 and 43,900. Additionally, the 50-day EMA at 43,026 acts as another resistance level that could influence price action in the near term.
If buying momentum picks up, these resistance levels may become critical areas to monitor, as breaking through them could confirm a stronger bullish move for the DJI. Should DJI break the golden ratio resistance at 43,900, the correction has been invalidated and DJI could soon target its ATH at 45,065 or even surpass it.
S&P 500 Exhibits a Comparable Setup
The S&P 500 has recently seen a correction of approximately 5.4% over the past few weeks. This pullback is reflected in the technical indicators, with the MACD histogram trending bearishly for the last two months, suggesting weakening momentum. However, the MACD lines remain bullishly crossed. Meanwhile, the RSI is hovering just below overbought territory, indicating that the index is not yet oversold and still has room to move lower before potential upside.
Should the S&P 500 continue its corrective phase, it encounters key Fibonacci support levels at 5,662 and 5,400. These levels will be crucial to watch for signs of a bounce or further downside as the market seeks to establish direction in the coming sessions.
S&P 500 Continues to Trend Within a Parallel Downward Channel
The S&P 500 has been trending lower in recent weeks, moving within a parallel downward channel. If this downward momentum continues, the next Fibonacci support levels indicate a potential downside of 3 % to 8.2 %. In addition, the 50-week EMA, located at 5,516, provides another key support level to watch for a potential bounce.
The technical indicators show increasing bearish momentum. The MACD histogram has been ticking lower, and the MACD lines recently crossed bearishly, signaling further downside pressure. However, the RSI remains in neutral territory, suggesting that there is still room for additional movement without being oversold.
Despite the current bearish signals, the EMAs continue to show a golden crossover, reinforcing a bullish trend in the medium term. This divergence between short-term bearish momentum and the medium-term bullish trend indicates that the S&P 500 is at a critical juncture, with both downside risk and potential support in play.
Is The S&P500 Poised For A Bullish Rebound?
On the daily chart, the indicators present a similar mixed outlook. The RSI remains in neutral territory, with the potential for a bullish divergence to form, suggesting a possible shift in momentum. However, the MACD lines are crossed bearishly, and the MACD histogram has been ticking lower for the past two days, signaling ongoing bearish pressure.
Despite these short-term bearish signals, the EMAs remain in a golden crossover, confirming the underlying bullish trend in the short to medium term. Should the S&P 500 experience a bullish reversal, it will encounter significant Fibonacci resistance levels at 5,900 and 6,000. A break above the golden ratio resistance at 6,000 could effectively end the current correction, potentially driving the S&P 500 back toward its all-time high (ATH) or even beyond it. This makes the 6,000 level a key area to watch in the coming sessions.
Konstantin Kaiser
Financial Writer and Market Analyst
Konstantin Kaiser comes from a data science background and has significant experience in quantitative trading. His interest in technology took a notable turn in 2013 when he discovered Bitcoin and was instantly intrigued by the potential of this disruptive technology.
www.fxleaders.com