• Dow Theory is built around the idea that markets move in three types of trends: primary, secondary, and minor trends, helping traders better understand market behavior.
• It emphasizes the concept that markets reflect all available information, making price movements a real-time indicator of collective sentiment.
• Dow Theory’s principles remain relevant, though modern applications adapt to today’s diversified, technology-driven markets.
• Traders can use Dow Theory with tools like moving averages and line charts to refine strategies for different timeframes, including intraday and long-term trades.

The Dow Theory is one of the bedrock principles of technical analysis. Developed over a century ago by Charles Dow, it remains a valuable tool for traders and investors aiming to make more consistent profit from following market trends. This guide explores what the Dow Theory is, how it works, and its relevance in today’s markets.

Table of Contents

• What is the Dow Theory in Technical Analysis?
• Dow Theory in Technical Analysis – How Does It Work?
• Why is the Dow Theory Important?
• How to Trade Using the Dow Theory – Trade Example
• The Dow Theory – Pros and Cons
• Does the Dow Theory Still Work?
• FAQs

What is the Dow Theory in Technical Analysis?

If you’ve been trading or even thinking about trading for a while, you’ve probably heard of the Dow Theory. It’s one of those foundational concepts in technical analysis that keeps popping up. But what exactly is it, and why does it matter?

The Dow Theory all started with Charles H. Dow, one of the brilliant minds behind The Wall Street Journal and the Dow Jones Industrial Average (DJIA). Dow didn’t sit down one day and write out “The Dow Theory.” Instead, it came from a series of articles he published, where he casually dropped pure gold about how the stock market works.

Dow’s work was so insightful that after his passing, other folks like William Peter Hamilton, S.A. Nelson, and Robert Rhea took his scattered ideas and pieced them together into what we now call the Dow Theory.

What makes this theory stand out is how it lays the groundwork for understanding market trends. Dow believed that markets follow trends—primary, secondary, and minor ones. He also pointed out that these trends reflect everything happening in the world: politics, economic changes, and even public sentiment. Essentially, if it’s affecting the market, it’s already baked into the price.

Here’s something interesting about the Dow Theory: it introduced the idea of market confirmation. This means that if one market index, like the DJIA, is trending upward, another related index, like the Dow Jones Transportation Average, should confirm the movement. If not, something’s fishy. And this concept of confirmation? This is the foundation to the asset correlation trading strategy. It’s still super relevant to how traders analyze markets today.

Another gem is the emphasis on volume. According to the Dow Theory, volume should increase in the direction of the trend. It’s a simple idea, but it’s a game-changer when you’re trying to figure out if a trend is valid or is just part of market noise.

In sum, even though the Dow Theory has been around for more than a century, it’s still incredibly useful. After all, when it comes to spotting trends and timing your trades, why not learn from the guy who started it all?

Dow believed that markets follow trends—primary, secondary, and minor ones. He also pointed out that these trends reflect everything happening in the world: politics, economic changes, and even public sentiment. Essentially, if it’s affecting the market, it’s already baked into the price.

Dow Theory in Technical Analysis – How Does It Work?

The Dow Theory is built on six essential principles that form a comprehensive framework for understanding market trends and making better trading decisions. Here’s a straightforward rundown:

1. The Market Discounts Everything

Dow believed that all available information—economic data, political events, and even unexpected occurrences—shows up in market prices. This means that prices reflect the collective knowledge and sentiment of all participants, giving you a real-time view of market conditions.

2. The Market Has Three Movements

Markets don’t move randomly. Dow identified three distinct types of movements:

• Primary Trends: These are the long-term trends lasting months or even years, defining whether the market is in a bull market or a bear market.
• Secondary Trends: These are shorter trends that last weeks to months, often acting as corrections to the primary trend. They typically retrace 33% to 66% of the primary move.
• Minor Trends: These are short-term fluctuations lasting a few days to weeks. They are less significant and don’t hold much weight in long-term analysis.

3. Primary Trends Have Three Phases

Every major trend develops in three stages:

• Accumulation Phase: Experienced investors start buying or selling assets before the broader market notices a shift.
• Public Participation Phase: This is when the trend becomes apparent, and more participants begin trading in the same direction, accelerating price changes.
• Excess Phase: This phase, which is also called the distribution phase, is when speculation increases and stock prices reach extreme levels, often signaling that the trend is nearing its end.

4. Averages Must Confirm Each Other

Dow emphasized the importance of confirmation between market averages. For instance, for a trend to be valid, both the industrial average and the transportation average should move in the same direction. If one moves up while the other doesn’t, it raises questions about the trend’s strength.

This correlation trading approach adds an extra layer of reliability to trend analysis. However, with how much of the use cases of the strategy have evolved into different market and asset classes, you don’t have to confirm the trend using the Industrial Average and Transportation Average while trading with the Dow Theory again. We’ll cover this more later in the article.

5. Volume Confirms the Trend

In a healthy trend, volume should increase in the direction of the movement. Rising prices with higher trading volume point to a strong uptrend, while declining prices with high volume confirm a strong downtrend.

6. A Trend Continues Until a Clear Reversal Occurs

Trends persist until there’s definitive evidence of a reversal. This principle warns against making premature assumptions about a trend ending without clear signs, encouraging traders to rely on confirmed signals.

Why is the Dow Theory Important?

If you’re exploring technical analysis, understanding Dow Theory is a must. So, what makes it such a powerful concept to master?

The Foundation of Technical Analysis

You might have heard something like this before: “The trend is your friend.” Indeed, the truth is the Dow Theory introduces the idea that markets follow identifiable trends. 

This concept of “following the trend” has formed the basis of technical analysis, giving traders a structured way to understand how market prices reflect all available information.

Identifying Market Trends

One of Dow Theory’s strengths is its classification of market movements into three types: primary, secondary, and minor trends. This categorization helps traders pinpoint the market’s overall direction and make up their minds about when to enter or exit trades with respect to what the market is currently doing.

Volume as a Key Indicator

Dow Theory places importance on trading volume as a way to confirm the strength of a trend. Higher volume in the direction of the primary trend signals its validity, helping traders distinguish between genuine moves and temporary ones.

Timeless Relevance

Even after over a century, Dow Theory remains a cornerstone of market analysis. Its principles continue to shape modern technical analysis tools and trading strategies, proving that solid ideas can stand the test of time.

How to Trade Using the Dow Theory – Trade Example

As we’ve mentioned earlier in the article, the way you should trade the Dow Theory today is a lot more different from how it was used over a hundred years ago, and it’s a lot simpler, too. The reason for such change is not far-fetched: we’re simply reacting to how the market evolves over time.

So, before we go straight into using a real-time example, here are some things to note:

• For intraday trading, don’t go lower than a 15-minute timeframe, especially if you’re just starting out. You can use 1-hour, 4-hour, daily, weekly, or even monthly and yearly timeframe for your analysis.
• We make use of a line chart rather than a candlestick chart while analyzing the chart.
• We add the 20 Simple Moving Average to give us a directional bias while also helping us filter out counter-trend trades.

Now that we’ve gone through the basics, let’s take a look at how to trade using the Dow Theory using the GBP/CAD pair as our case study.

The first thing you want to do is to set the chart to a line chart and add a 20 SMA to the chart, as shown below:

After that is done, we can now talk about how to enter the trades using some chart patterns that Dow Theory suggests. If the price is trading above the 20 SMA, we wait for the price to form a higher low, and then we take our BUY trade immediately after the price breaks the high, as seen in the charts below.

On the other hand, if the price is trending below the 20 SMA, all we have to do is wait for the price to form a lower high and then wait for the price to break the low created by the downside before we open a SELL trade.

To manage your risk, you can simply set the stop-loss below a swing low if you are in an uptrend or place the stop-loss above a swing high if you are selling. Knowing where to take profit requires some skill. Some traders take profit at a 1-2 risk-reward ratio, while others close their trades after an opposing pattern is forming.

The key ideas of Dow Theory, such as identifying market trends and the notion that markets reflect all available information, are still central to technical analysis to this day. These concepts provide traders with a structured framework to understand market behavior and make informed decisions.

The Dow Theory – Pros and Cons

Dow Theory, like any framework, offers both strengths and limitations that traders and investors should keep in mind. Let’s check out some of its pros and cons.

Pros of Dow Theory

Dow Theory has several strengths that have kept it relevant for over a century. These advantages make it an essential framework for traders and investors who want to understand market trends and make more informed decisions. Let’s explore its key benefits.

Simplicity and Clarity

One of Dow Theory’s biggest advantages is its straightforward approach. Its principles are easy to understand, making it accessible to traders at all experience levels. The clear guidelines help identify market trends without requiring complex calculations or trading tools.

Long-Term Perspective

Dow Theory encourages a focus on primary trends, which can last several months or years. This long-term outlook helps investors avoid being swayed by short-term market fluctuations, promoting more disciplined decision-making. With that in mind, the Dow Theory is typically more suited for swing trading and the position trading strategy.

Trend Identification

The emphasis on identifying and following trends aligns perfectly with the old market saying, “The trend is your friend.” By sticking to the prevailing market direction, investors can make more informed decisions and potentially improve their outcomes.

Cons of Dow Theory

Despite its strengths, Dow Theory is not without its challenges. Here are some of the main drawbacks to consider.

Lagging Indicators

One of the biggest drawbacks of Dow Theory is that it often confirms trends only after significant price movements have already occurred. This delay can lead to missed opportunities for traders seeking to optimize their entry and exit points.

Subjectivity in Interpretation

The theory relies on interpreting price movements and chart patterns, which can be subjective. Different analysts might draw different conclusions from the same data, leading to inconsistencies in application.

Overemphasis on Averages

The theory places heavy weight on the movements of specific market averages, such as the Dow Jones Industrial Average and the Dow Jones Transportation Average. This focus may not always provide a complete picture of the broader market or other sectors, increasing the risk of misinterpretation.

Does the Dow Theory Still Work?

When it comes to trading philosophies and strategies, there are more inconsistent systems than consistent ones. So, this leaves us with a question; “If the Dow Theory was used over 100 years ago with many positive results, does it still work today?”

Well, while its foundational principles have shaped the way we analyze markets, their effectiveness in modern conditions requires a closer look.

The key ideas of Dow Theory, such as identifying market trends and the notion that markets reflect all available information, are still central to technical analysis to this day. These concepts provide traders with a structured framework to understand market behavior and make informed decisions.

Despite its enduring relevance, the complexities of today’s financial markets present challenges to the traditional applications of Dow Theory:

• Dow Theory emphasizes confirmation between industrial and transportation averages. However, in an economy dominated by technology and service sectors, this approach may not fully capture market trends.
• The rapid flow of information and the rise of high-frequency trading can create behaviors that deviate from the historical patterns observed during Dow’s time.

So, while Dow Theory’s foundational ideas still offer valuable insights into market trends, applying them in today’s dynamic environment requires a modern perspective. Therefore, for best results using the Dow Theory, you must balance timeless concepts with current realities to enhance decision-making and improve outcomes.

Frequently Asked Questions About Dow Theory in Technical Analysis

To deepen your understanding of Dow Theory, here are some frequently asked questions that address its key concepts and applications.

What is the main point of the Dow Theory in technical analysis?

The main purpose of the Dow Theory is to identify and analyze market trends. It categorizes market movements into three types: Primary trends, secondary trends, and minor trends.

The theory posits that understanding these trends helps traders and investors make informed decisions about entering or exiting positions. It also emphasizes that markets reflect all available information and that trends persist until there’s clear evidence of a reversal.

What is the best timeframe for using the Dow Theory?

Dow Theory is traditionally favored by long-term investors, as it focuses on identifying primary trends that span months or years. However, its principles are versatile and can also be applied to shorter timeframes. 

For instance, secondary trends lasting weeks to months can guide swing traders, while minor trends lasting days may offer insights for short-term traders. The choice of timeframe depends on the trader’s goals and risk tolerance.

What are the best tools to add for the Dow Theory strategy?

Since the Dow Theory is a broad concept of trading, then there are plenty of tools, chart patterns and indicators to add for best results. For instance, the order flow in trading is a great tool that can be incorporated with the Dow Theory. The Wyckoff chart pattern/theory is another excellent technique since it helps traders identify the market cycle. Additionally, tools such as the level 2 market data, and volume indicators like the Volume Profile indicator, and the On-Balance Volume indicator can be highly effective when utilizing the Dow Theory strategy.

• Most futures markets worldwide are open 24 hours a day, five days a week, from Monday to Friday, with a one-hour break during the day.
• There are four key parts of each trading day in the futures market – Pre-market, opening, midday, and closing.
• The best time to trade futures depends on a trader’s trading style and strategy. Traders who prefer volatile market activity should focus on the opening and closing sessions, while traders who prefer less volatility should be more active during the midday trading session.

Success in trading futures is not just about finding the right strategy; it’s also about finding the perfect trading time of the day so it matches your personality and trading style.

This article will explore the optimal times to trade across various futures markets. You’ll discover when these markets are most active and when the futures markets are less volatile. You’ll also learn how to leverage peak trading periods to improve your strategies and avoid common pitfalls.

Table of Contents

• Futures Markets Trading Hours
• US Futures Market – Key Trading Sessions
• When is the Best Time to Trade Futures?
• Futures Vs. CFDs – Differences and Similarities, and Which is Better?

Futures Markets Trading Hours

Before we start, let’s answer this critical question – What are the trading hours of the futures markets?

So, generally, most futures markets around the world are open 24 hours a day, five days a week, from Monday to Friday, with a short break of one hour, usually between 16:00 PM and 17:00 PM Central Time. The one-hour break is designated for server updates, managing open positions, and verifying compliance with maintenance margin requirements. This basically means that futures trading is available 23 hours a day for most futures products. 

You should also note that futures trading hours vary depending on the exchange and the chosen asset. Remember that the futures market is not just one market. As a matter of fact, according to Wikipedia, there are 27 major exchanges worldwide and more than 100 small futures exchanges. So, every futures exchange has its own trading hours based on its domestic market. Not only that, different markets/assets have different trading hours. 

However, it’s safe to say the vast majority of futures traders usually trade on the Chicago Mercantile Exchange, which is the largest options and futures exchange worldwide in terms of daily volume and the number of assets provided. As such, in this guide, we’ll focus on the US futures market.

US Futures Market – Key Trading Sessions

The futures market is open 23 hours a day; however, since it is highly correlated with the US working day as well as the US stock market, there are key sessions of the day every futures trader must be aware of.

US Pre-Market Trading Session: 8:00 AM-9:30 AM

The US pre-market hours are a crucial time for future traders as US participants enter the market, typically setting the market direction for the day. Often, the high volatility builds up in the pre-market session as US investors return to the market following the Asian and European sessions. 

Additionally, US economic data such as the GDP, CPI, and the Non-Farm Payrolls are released at 8:30 AM, which normally can be a key factor in adding volatility to the markets and helping traders exploit trading opportunities. 

US Market Opening Session: 9:30 AM-11:30 AM

Many futures traders consider the US opening session to be the best time of the day to capture significant price movements. This trading session is highly liquid since there’s an overlap with the European market. Around the closing hour of the European markets, there’s the highest level of trading volume in the day as Europen traders close their daily positions.  

In short, there’s heavy trading volume and market volatility around this session, which can be ideal for scalping and short-term trading. 

At the same time, take note that since prices fluctuate randomly following the first minutes of the opening session, it is highly recommended to be cautious and work with risk management tools such as stop loss and take profit. 

Mid-Day Trading Session: 11:30 AM- 3:00 PM

The mid-day trading session is normally the ‘calm’ trading hours of the day.  Around these hours, the markets tend to settle down, with lower volatility and volume. 

Therefore, this part of the day can be ideal for ‘slow’ traders and those who prefer to collect small profits. 

US Market Closing Session: 3:00 PM-4:00 PM

Like the opening session, the US market closing session is characterized by high trading volumes and volatility, making it an ideal time frame for those who thrive in volatile markets. During this session, day traders close their positions, scalpers exploit the high volatility with a large number of trades and high-frequency trading bots add liquidity to the futures market. 

Here’s a quick illustration of key trading sessions in the e-Mini S&P 500 Futures market.

As you can see from the 30-minute e-Mini SP500 Futures chart in a span of two days, the key parts of a trading day are repetitive, and the formation of the trading volume looks almost the same every day. 

The market starts with high trading volume during the opening hours, followed by the midday session, at which the volume decreases. Finally, the day ends with the closing session when traders close their daily positions.

When is the Best Time to Trade Futures?

Like many other trading preferences, this is subjective to one’s personality and trading style. From my experience, I‘ve seen traders that thrive in a volatile market while others (including myself) are looking for a calm or boring market condition. 

Further, the best time to trade futures also depends on the specific market you are focusing on. For example, the Grains futures market is very sleepy during the Asian and European sessions and could be highly active when the US market opens. Other markets, on the other hand – like equity index futures, metals futures contracts, and commodity markets – are often active the entire day and have fewer swings in volatility and liquidity. 

Having said that, we are here to answer questions and provide guidance to those who need it. So, what are the best times to trade futures?

For traders who are looking for volatility, the best trading hours in the futures market are around 9:00 AM to 10:30 AM EST and 15:00 to 16:00 PM EST. During these trading hours, there’s often high volatility, especially in the US futures market. Therefore, if you are a trader looking for volatility, then you better focus on these periods of the day. This is, in fact, not something unusual to trade during the opening and closing hours. For that matter, there are also different trading strategies, such as the Opening Range Breakout strategy, that are specifically designed to help traders become profitable by trading these specific hours of the day. 

On the other hand, if you are running away from volatile markets, then go and grab a coffee during these trading hours. Many traders struggle with trading when the market is highly unpredictable. As such, they often look for calm and less volatile periods of the day to be able to put their strategy into action. If you feel that you are part of this group of traders, then you might want to focus your trading activity between 11:00 AM and 15:00 PM EST.

Add it all up:

• For traders who thrive in volatile markets, the best time to trade futures is during the opening session (9:30 AM-11:30 AM EST). 
• For those who find it easier to make profits in calm markets, the best time of the day to trade futures is during the pre-market trading session (8:00 AM- 9:30 AM EST) and the mid-day trading session (11:30 AM- 3:00 PM EST).

Futures Vs. CFDs – Differences and Similarities, and Which is Better?

Another market that is open for 23 hours a day, five days a week, is the CFD market, which works very similar to the futures market.

CFDs and futures are both financial derivatives that enable traders to trade a wide range of financial assets, including commodities, shares, FX currency pairs, equity indices, interest rates, and digital assets. 

However, there are differences and similarities between futures and CFDs, and each form of trading has its pros and cons. This leaves many traders with the question of which is better – futures or CFDs?

Let’s quickly explore the similarities between futures and CFDs:

Despite the similarities, there are also key differences you must be aware of before making a decision on which instrument to choose. 

The Bottom Line

So, which is better – CFDs or futures?

Well, obviously, that depends on a trader’s objectives, trading goals, and trading strategies. It also depends on your budget and the time you have to learn a new market. In other words, there’s no market that is better than the other. Futures trading has several advantages over CFDs and vice versa. 

Ultimately, both futures and CFDs can be viable options for trading in the markets. In general, futures trading is more suited for prop trading firms, retail traders with large investment capital, long-term traders, and those who need to hedge their positions. 

On the other hand, CFDs are simple to trade and are, therefore, normally favored by retail traders who are looking for direct access to the markets without any complications. 

So, if you are looking for a reliable CFD brokerage firm, you can visit SwitchMarkets – one of the most cost-effective brokers in the industry that offers a variety of nearly 2000 assets (including equity markets), top-notch trading platforms, and free trading tools.

Key Points

• The USDJPY pair continues its bullish trend, gaining +0.54% today after Thursday’s +0.12% rise.
• A strong U.S. dollar, supported by cautious Fed rate cut expectations for 2025, has pushed USDJPY higher.
• No significant economic data is expected today, but market participants should watch for unexpected events.

USD/JPY Daily Price Analysis – 13/12/2024

The USD/JPY pair continues its bullish trajectory, with today’s trading opening at 152.626 and climbing to a current level of 153.472, marking a daily gain of +0.54%. This follows Thursday’s increase of +0.12%, where the pair closed at 152.649. 

The ongoing strength in the pair is largely driven by a robust U.S. dollar, supported by evolving Federal Reserve policy expectations, and a weakened Japanese yen amid market speculation surrounding the Bank of Japan’s next move.

The U.S. dollar has maintained a strong footing in recent sessions, with the dollar index climbing to 107.11, its highest level in a month, and achieving a weekly gain of 1.1%. This performance reflects investor sentiment that the Federal Reserve will adopt a more cautious approach to rate cuts in 2025. 

Recent economic data from the United States, including cooling job market indicators and subdued producer price inflation, have reinforced expectations for a Fed rate cut at the upcoming December 18 meeting. However, uncertainty lingers around the timing of subsequent cuts, with March 2025 emerging as the most likely period for another reduction.

The Japanese yen has faced consistent pressure against the dollar this week, with USD/JPY gaining 2% on the yen. Reports from reliable sources suggest that the BoJ may forgo a rate hike at its December 19 meeting as policymakers wait for clearer evidence of sustained wage growth and assess how U.S. monetary policy evolves under incoming President Donald Trump. 

The market is currently pricing in only a 23% probability of a BoJ hike at this meeting. Analysts note that if the BoJ does decide to implement a hike exceeding 15 basis points, the yen could strengthen significantly, leading to a downside move in USD/JPY. Conversely, a decision to leave rates unchanged would likely result in further upward momentum for the pair.

Broader global developments are also influencing the USD/JPY pair. The U.S. dollar has benefitted from its safe-haven status amid a risk-off sentiment in financial markets, driven in part by weaker-than-expected economic data from the United Kingdom and recent rate cuts by the European Central Bank and Swiss National Bank. These factors have added to the dollar’s appeal and provided additional support for its rally against the yen.

Key Economic Data and News to Be Released Today

At present, there are no significant economic data releases scheduled that are likely to have a direct impact on USD/JPY movements today. However, market participants should remain vigilant for any unscheduled announcements or geopolitical developments that could influence sentiment and lead to heightened volatility.

Visit our Economic Calendar

USD/JPY Technical Analysis – 13/12/2024

USD/JPY is currently at a key level zone. This zone, although acting as a resistance level, is most likely not going to hold the price down because the RSI is not yet overbought and the bullish momentum doesn’t seem like it is going to die down anytime soon.

So, we may expect a minor reaction at this key level, but overall, we are expecting the price to break out of the zone and continue its bullishness.

On the 15-minute chart, we see that price is overbought and a bullish trendline is also forming just below price action, since we are anticipating a bullish movement from the higher timeframe, we can expect price to retrace to the trendline, give us a bullish candlestick pattern and continue to the upside. 

On the other hand, should the price break through the trendline to the downside, we can expect the price to dip a little into the support zone just below the current price.

USD/JPY Fibonacci Key Price Levels 21/11/2024

Short-term traders planning to invest in USD/JPY today should keep a close eye on the following key price levels for the day:

Key Points

• Rheinmetall, Adidas, and Puma led gains on U.S.-China trade optimism.
• Deutsche Post, Brenntag, and HeidelbergCement lagged amid eurozone growth concerns.
• Bearish technical patterns signal a potential DAX reversal near key resistance levels.

DAX 40 Daily Price Analysis – 12/12/2024

The DAX 40 traded slightly lower at 20,407.59, reflecting a -0.09% change from its previous close of 20,428.20, after opening at the same level today. This minor pullback follows Wednesday’s robust performance, where the index rose +0.56% to close near record highs of 20,428.20.

Among the top performers on the DAX 40, Rheinmetall saw a strong gain of +1.6%. Similarly, Adidas and Puma posted gains of +1.2% and +1.0%, respectively, benefiting from positive news out of China. The Chinese Commerce Ministry’s willingness to re-engage with the U.S. on trade talks has fueled hopes for improved economic conditions, particularly in sectors exposed to Chinese consumer demand, such as luxury goods and apparel.

On the downside, Deutsche Post declined -0.8%, reflecting sector-specific challenges, while Brenntag and HeidelbergCement lost -0.6% and -0.5%, respectively. These losses are indicative of mixed macroeconomic sentiment as investors weigh the impact of slowing eurozone growth and the uncertain pace of monetary easing. While broader market movements remain subdued, these stocks have shown sensitivity to the cautious tone dominating today’s trading environment.

Key Economic Data and News to Be Released Today

The highlight of the day is the European Central Bank’s (ECB) monetary policy decision, scheduled for 13:15 GMT. Markets widely anticipate a 25-basis-point rate cut, reflecting the central bank’s ongoing efforts to combat sluggish economic growth in the eurozone. The focus will be on the ECB’s forward guidance as investors look for hints about the pace of future rate reductions. 

A dovish surprise, such as an indication of accelerated cuts, could buoy the DAX 40 and other European indices, while a more measured or hawkish tone might dampen sentiment.

Visit our Economic Calendar

DAX 40 Technical Analysis – 12/12/2024

Dax 40 is looking bearish today; we are anticipating a reversal from the higher timeframe. Looking at the price action, the RSI shows that the index is overbought and is ripe for a bearish reversal.

At the same time, the price reacts to a key resistance level while also forming a bearish head and shoulder pattern during the 4-hour timeframe. Now that we know our bias on the 4-hour timeframe, we are simply going to look for a corresponding bearish setup on the 15-minute timeframe to ride the downward move.

On the 15-minute, price is currently trending above the 200 EMA, indicating that market sentiment on the lower timeframe is still bullish. So, in order to enter a SELL trade, we can simply wait for the price to break below the bullish trendline and close below the EMA before going down.

Dax 40 Fibonacci Key Price Levels 12/12/2024

Short-term traders planning to trade the Dax index today should keep a close eye on the following key price levels for the day:

Key Points

• Middle East tensions boost safe-haven demand for gold.
• China’s resumed gold purchases signal strong central bank interest.
• Wall Street targets $3,000 gold by 2025, citing strong fundamentals.

Gold Daily Price Analysis – 11/12/2024

Gold prices are experiencing a steady ascent as the market eagerly anticipates key U.S. economic data. Futures rose 0.3% to $2,725.60 per troy ounce, with spot prices also climbing to $2,729.1 in early trading. The current uptick builds on yesterday’s robust 1.21% gain, reflecting a combination of factors influencing investor sentiment.

Geopolitical tensions continue to provide a supportive backdrop for gold. Escalating conflict in the Middle East, notably Israel’s strikes on strategic weapon stockpiles in Syria, has heightened risk aversion among investors. Safe-haven demand remains robust, as gold is often perceived as the ultimate hedge during times of geopolitical instability.

Adding to the bullish sentiment is China’s central bank resuming gold purchases after a six-month hiatus. This move underscores the ongoing global central bank appetite for gold, further underpinning prices.

Wall Street’s optimistic outlook on gold, including Goldman Sachs’ $3,000 per ounce target by 2025, reinforces confidence in the yellow metal. Even in a scenario of temporary dollar strength, gold’s long-term fundamentals remain strong.

Key Economic Data and News to Be Released Today

The most significant driver today is the market’s anticipation of the U.S. CPI report. Forecasted at 2.7% for November, up from October’s 2.6%, the data could solidify expectations of a Federal Reserve interest rate cut during its December 17–18 meeting. 

A 25-basis-point cut is already priced in with a 90% probability, according to market consensus. However, deviations from CPI estimates could unsettle these expectations and cause volatility in gold prices.

A lower-than-expected CPI would support gold by weakening the U.S. dollar and reinforcing the Fed’s dovish stance. Conversely, stronger-than-expected inflation could raise doubts about the anticipated rate cut and bolster the dollar, thereby pressuring non-interest-bearing assets like gold.

Visit our Economic Calendar

Gold Technical Analysis – 11/12/2024

Gold price action today is not as straightforward as one would want to see. However, it’s not overly complicated. Let’s break it down in a bit.

Since we use a multi-timeframe approach when it comes to analyzing price action, let’s see what’s going on in the 4-hour timeframe. 

The 4-hour timeframe shows that Gold prices are inside a key level, potentially acting as a support for price. On a normal day, we can simply expect the price to react to this zone, form a bullish candlestick pattern, and zoom off to the upside. But it’s not that straightforward here because of the RSI.

If you closely monitor the Relative Strength Index (RSI) indicator, you’ll see that it shows that price is overbought, meaning that we are expecting Gold prices to retrace a little to the downside or to give a total bearish reversal. Now that we are having conflicting market sentiment on the higher timeframe, let’s scale down to the lower timeframe and see if things get clearer.

On the 15-minute timeframe, price is trending above the intraday 200 EMA, showing a continuing bullish sentiment; what this means is that as long as price is above the EMA, we can continue to look for opportunities to go long.

As you can see above, a bullish trendline setup is already forming. Should the price retrace to this trendline to give a third touch while also giving a bullish candlestick pattern confluence, we can look at a short-term long position. Otherwise, it is better to step aside and let the market give a clearer price action.

Gold Fibonacci Key Price Levels 11/12/2024

Short-term traders planning to trade gold today should keep a close eye on the following key price levels for the day:

• Russia/Ukraine peace talks are anticipated for early 2025.
• The key market driver for silver this week will be Wednesday’s US CPI release.
• A silver buy was issued on 3 December by the Daily 5-8-13 EMA trading strategy.

Market Overview

Autumn 2024 has been a tumultuous period for the metals markets. Following a big 2024 rally, the November trade brought the gold and silver bears out of hibernation. Prices fell by a whopping 6.25% as the markets digested the US election outcome. December has been a different story as silver has pared November’s losses. 

What’s next for silver (XAG/USD)? The answer to that question will depend on Fed policy and war escalation.

Read More: Copper Price Forecast – How High Can Copper Price Go?

Peace Or WWIII?

Without question, war is a primary bullish market driver for precious metals. That has been the case throughout 2024, with Russia/Ukraine and Israel/Hamas/Iran bringing significant uncertainty and bidders to the marketplace. 

Russia/Ukraine dominated the November news cycle. Escalation was the theme, with Ukraine striking deep into Russia with US-supplied ATCM missiles and UK-build Stormshadow munitions. The result was Russia revising its nuclear policy, launching an ICBM on Ukraine, and multiple large-scale attacks targeting key electrical infrastructure. 

December has been a different story. Now, peace talks are being proposed by both NATO and Russia. Only hours ago of this writing, Poland’s Prime Minister Donald Tusk publicly addressed the possibility of Russia/Ukraine peace talks in the near term. As of 1 January, Poland will assume the European Union’s rotating presidency. Tusk went on record with the following statement regarding Russia/Ukraine negotiations:

“I will have a series of talks concerning primarily the situation beyond our eastern border. As you can imagine, our delegation will be co-responsible for, among other things, what the political calendar will look like, perhaps what the situation will be like during the negotiations, which may, although there is still a question mark, start in the winter of this year.” 

To sum up Tusk’s statement, Poland looks to place peace talks on the front burner of EU policy as early as January of 2025. This isn’t a coincidence. Incoming US POTUS Donald Trump will be inaugurated on January 20th; Trump has promised peace in the region. Without question, official EU/Ukraine/Russia/US peace talks will likely begin shortly after that.

For silver, peace talks will be a short-term bearish market driver. If an agreement to stop the Russia/Ukraine War is reached, then a high degree of geopolitical uncertainty will be resolved. Although a long-term bullish bias toward silver is appropriate, a Q1 2025 “peace pullback” is certainly possible.

XAG/USD: Technical Outlook

The chart below looks at the Daily XAG/USD chart via the 5-8-13 EMA strategy. Executing this strategy is simple: when the 5 EMA crosses over the 8 EMA, and the price is above all three EMAs, one buys the market. On 3 December, the 5 EMA crossed above the 8 EMA and closed above all three EMAs. This technical event marks a buy entry and a long position.

With any moving average crossover strategy, the secret to success is to dial in risk to reward. One way to do this is to hold positions until another crossover develops. In this case, one is long from 31.03, with a stop loss beneath the previous Swing Low; profit is taken when the 5 EMA crosses under the 8 EMA. So, the long position remains technically valid for the time being.

High CPI = Hawkish Policy

Wednesday is a huge day on the markets. November US CPI is due out during the pre-Wall Street hour. Analysts expect this figure to hold firm at previous levels. In the event CPI surprises, be ready for extreme volatility in the silver market.

As of this writing, the CME FedWatch Index assigns an 88% of a ¼ point rate cut at next week’s Fed Meeting. If CPI comes in hot, these expectations will likely decrease significantly. Be aware of CPI and its potential impact on silver; it will pay to be ready for anything when this report hits the newswires on Wednesday at 8:30 AM EST!

Key Points

• EUR/USD is flat as traders await U.S. inflation data and ECB policy updates.
• GBP/USD struggles amid BoE rate-hold expectations and declining investor confidence.
• USD/JPY stays bullish, supported by Fed-BoJ policy divergence and safe-haven dollar demand.

General Market Overview – EUR/USD, USD/JPY, GBP/USD Analysis & Prediction

The forex market looks quite interesting this December, especially with central banks lining up to make big decisions. From the Federal Reserve to the European Central Bank and the Bank of England, there’s a lot to watch out for.

Now, here’s the thing: while markets have already priced in a rate cut by the Fed, the real game-changer might come from how the labor market and inflation play into their next steps. And as for the ECB, a quarter-point cut might be on the horizon, but investors are more interested in any clues about what’s coming next. Meanwhile, over at the BoE, Governor Andrew Bailey has hinted at multiple rate cuts in 2024, but don’t expect any surprises this week. 

Against this backdrop, the U.S. dollar has stayed firm, thanks to its safe-haven status and strong labor market performance, putting currencies like the euro, pound, and yen under pressure.

Looking into the upcoming week, traders should pay close attention to the US CPI data, which is expected to be released on Wednesday and can provide more clues following the weaker-than-expected NFP report released last Friday. Additionally, the ECB interest rate meeting on Thursday is also expected to be in focus this week.

EUR/USD Analysis

The euro and the dollar are in a bit of a stalemate right now, with EUR/USD trading near $1.0583. If you’re wondering why things feel so flat, it’s because investors are waiting on two major updates: U.S. inflation data and the ECB’s policy meeting. 

A rate cut from the ECB seems all but certain, but the real question is whether ECB President Christine Lagarde will sound hawkish, dovish, or somewhere in between when she addresses the market. That’s the kind of clarity traders need before deciding where the euro is headed next.

On the other hand, the dollar isn’t exactly giving the euro much room to breathe. Strong labor market data from the U.S. and growing geopolitical risks have kept the greenback in high demand.

With both sides holding steady, EUR/USD is stuck in a tight range. But once the data and central bank updates start rolling in, this pair could make a decisive move. For now, keep an eye on resistance at 1.0600 and support at 1.0520 to guide your strategy.

GBP/USD Analysis

Sterling has been feeling the weight of expectations recently, especially with the BoE likely to sit tight on rates at their upcoming meeting. Sure, there’s talk of rate cuts in 2024, but for now, Governor Andrew Bailey and the Monetary Policy Committee are expected to keep things steady. Even with ultra-dove Swati Dhingra likely voting for a rate cut, it’s just not enough to shift the BoE’s broader stance at this point.

Now, if you’re thinking this sounds bearish for the pound, you’re absolutely right. GBP/USD has struggled to gain traction, and recent data shows investor confidence waning, with net GBP long positions shrinking for three straight weeks. Combine that with a resilient U.S. dollar supported by strong labor market performance, and the pound’s upside looks pretty limited for now.

Key levels to watch? If the pair breaks below 1.27150, the slide could accelerate, while a push above 1.28120 will need serious momentum to hold.

USD/JPY Analysis

Let’s talk about USD/JPY because this pair has been riding the wave of diverging central bank policies. On one side, you have the Federal Reserve gearing up for a rate cut, but with a labor market that’s still flexing its muscles. On the other hand, there’s the Bank of Japan, leaving the yen on shaky ground. Not to mention, geopolitical tensions are adding to the dollar’s appeal as traders look for safe-haven assets that aren’t the yen.

Right now, USD/JPY is hanging around 150.06, and it’s showing no signs of giving up its bullish momentum. The BoJ’s cautious stance under Governor Kazuo Ueda keeps Japanese government bond yields low, while the dollar continues to dominate.

If the pair can break past 150.50, the door opens for a move toward 151.00, but any dip below 149.50 might bring some short-term reprieve for the yen. Either way, this pair remains one to watch as the week unfolds.

Key Points

• Powell signaled a strong economy, but markets expect a December rate cut.
• Tech earnings varied, with Salesforce up but SentinelOne down.
• Technicals suggest a retracement, watch support, and 200 EMA.

NASDAQ 100 Daily Price Analysis – 06/12/2024

The Nasdaq 100 has displayed marginal movement in today’s trading session, opening at 21,419.8 and currently trading at 21,435.0, reflecting a modest gain of +0.06%. This comes on the heels of Thursday’s session, where the index closed at 21,423.1 after opening at 21,471.6, registering a decline of -0.29%. 

Investors are cautiously awaiting the release of the U.S. non-farm payrolls report for November, expected to show an addition of approximately 200,000 jobs, rebounding from October’s minimal gain of 12,000 jobs. This anticipated recovery is attributed to the return of Boeing workers post-strike and the normalization following disruptions from Hurricanes Helene and Milton. 

Federal Reserve Chair Jerome Powell has indicated a stronger-than-expected economy, suggesting a potential slowdown in the pace of interest rate cuts. Despite this, market sentiment reflects a 74% probability of a 25 basis point rate cut in the upcoming December meeting. 

The technology sector has shown mixed performance. While companies like Salesforce and Marvell Technology have reported strong earnings, others such as SentinelOne and Synopsys have faced declines due to earnings misses and subdued forecasts, respectively.

The recent surge of Bitcoin surpassing the $100,000 mark has positively impacted cryptocurrency-related stocks, including Coinbase, MARA Holdings, and MicroStrategy. This development has contributed to the overall performance of the Nasdaq 100, given the index’s exposure to the tech and crypto sectors.

Broader economic factors, such as political instability in regions like South Korea and France, have introduced volatility in global markets. However, the Nasdaq 100 has remained relatively stable, with investors focusing on domestic economic data and corporate earnings.

Key Economic Data and News to Be Released Today

The release of the Nonfarm Payrolls report at 8:30 a.m. ET is anticipated to be a major market-moving event. Economists project an increase of 200,000 jobs for November, with the unemployment rate expected to edge up to 4.2%. 

Any significant deviation from these forecasts could influence market sentiment and impact the Nasdaq 100 as traders reassess the Federal Reserve’s policy stance. Stronger-than-expected job growth might prompt a reevaluation of the Fed’s anticipated rate cuts for December and beyond, while weaker data could reinforce expectations for continued monetary easing into 2024.

Shortly after the US market opens, the University of Michigan Consumer Sentiment Index will be released. Throughout the day, four Federal Reserve officials are scheduled to speak, potentially shedding light on the central bank’s policy direction before the media blackout for the December 17–18 meeting begins. 

Additionally, corporate earnings reports, particularly in the retail and tech sectors, could introduce volatility as investors closely analyze companies’ forecasts for resilience amid shifting macroeconomic conditions.

Visit our Economic Calendar

NAS100 Technical Analysis – 6/12/2024

Nas 100 is bullish on the higher timeframe, while the lower timeframe is giving a bearish outlook. Let’s break it down:

On the 4-hour timeframe, price is currently trading inside of a rising channel. However, the RSI is overbought, giving us a potential bearish retracement to the key support level just below the current market price.

So, on the 15-minute chart, the seemingly small retracement is a significantly rewarding trade setup if it eventually works out. Price has already broken below the bullish trendline. Traders who are looking to short the market should wait till the price closes below the 200 EMA before opening a position.

NASDAQ100 Fibonacci Key Price Levels 06/12/2024

The technical setup suggests a cautious approach as the index is testing critical support levels. In view of this, here are some critical support and resistance levels to pay attention to:

Key Points

• Natural Gas rose +1.97% to $3.102/MMBtu, driven by LNG exports and weather shifts.
• Exports hit 14.2 bcfd, reflecting strong global demand.
• Production rose to 102.3 bcfd, with inventories +7.2% above average.

Natural Gas Daily Price Analysis – 5/12/2024

Natural Gas futures rebounded strongly, with prices climbing to $3.102/MMBtu, a +1.97% increase from today’s open of $3.071. This surge follows Wednesday’s close at $3.043 (+0.03%), which marked a modest recovery from a two-week low. 

Natural gas deliveries to the seven major U.S. LNG export facilities rose to an average of 14.2 bcfd in early December, up from 13.6 bcfd in November, approaching record highs. This surge underscores strong global demand for U.S. LNG, supporting prices. The growth in LNG feedgas volumes signals robust export activity, potentially offsetting bearish factors like elevated domestic inventories.

Forecasts indicate a transition from colder-than-normal conditions through December 7 to warmer-than-normal weather afterward. While short-term cold spells have temporarily increased heating demand, the shift to milder temperatures could cap upside price momentum. 

Dry gas production in the Lower 48 states increased to 102.3 bcfd in December, compared to 101.5 bcfd in November, though it remains below the record high of 105.3 bcfd from December 2023. 

Current U.S. natural gas inventories remain +7.2% above the five-year seasonal average, signaling ample supply that could limit price surges.

Natural gas demand from utilities may face headwinds as U.S. electricity output fell -3.94% y/y to 74,881 GWh for the week ending November 30. Warmer winter temperatures could sustain elevated supply levels, further tempering price gains.

Key Economic Data and News to Be Released Today

The weekly EIA Inventory Report will be released later today. Consensus expects a draw of -36 bcf, smaller than the five-year average of -47 bcf. Any deviation from expectations could influence price direction. 

Additionally, adjustments to forecasts for mid-December, particularly colder trends, could trigger additional short covering or bullish momentum.

Visit our Economic Calendar

Natural Gas Technical Analysis – 5/12/2024

NG looks promising today. The higher timeframe to the lower timeframe presents a high probability of BUY setups. Let’s quickly break it down:

During the 4-hour timeframe, Natural Gas reacts off the lower trendline while hitting the oversold level on the RSI. Having these confluences, we can expect the price to move to the upside in the short term.

To get an entry, let’s scale down to the 15-minute timeframe. Now that we have a bullish bias from the higher timeframe, we are looking for a BUY setup in the lower timeframe.

After a clear break to the upside, we expect the price to retest any of the key level zones and give us a bullish candlestick pattern before going up. 

However, it is worth noting that the RSI on the 15-minute is currently overbought. So, the price may be a little choppy.

Natural Gas Fibonacci Key Price Levels 5/12/2024

Short-term traders planning to invest in NG today should keep a close eye on the following key price levels for the day:

• The EUR/USD is in consolidation around 1.0500.
• December US Non-Farm Payrolls (NFP) is the eurodollar’s key short-term market driver.
• A combination of EU CPI contraction and a more hawkish Fed tone point to a bearish trend extension for the EUR/USD.

Market Overview

November was a massive month for the USD. Values rose across the majors as traders aggressively priced a newly hawkish US Federal Reserve. November is over. December is a fresh month, featuring another round of employment numbers, a Fed Meeting, and CPI data.  

Make no mistake — the EUR/USD may be in a very different place on 1 January 2025.

US Labor Takes Center Stage

Central banks are the big dogs of global finance. They craft and institute monetary policy designed to ensure commerce thrives. At the core of any central bank’s function are two missions: promote maximum employment and ensure pricing stability. The Fed, BoE, ECB, RBNZ, RBA, and BoC adhere to this directive.

At times, policy decisions are obvious. The onset of COVID-19 brought emergency rate cuts to zero percent. Once the pandemic subsided, banks raised rates to remove excess liquidity from the global financial system. 

Since March 2020, Fed policy moves have been predictable. Now, the waters are murky. Inflation remains above the 2% objective while the jobs market is weakening. October’s US Non-Farm Payrolls (NFP) reading came in at a dismal 12,000; this gain was largely attributed to the governmental and healthcare sectors. And, 2024 has been the year of downward NFP revisions; it won’t be a big surprise if October’s numbers are dropped into negative territory in the 6 December press release.

December NFP is projected to come in at 202,000 for November, up significantly from October numbers. If this figure falls below expectations, the USD will likely experience some short-term selling.

Bottom Line: Fed policy is now in flux, and the 6 December NFP release has the potential to be a primary EUR/USD market driver.

EUR/USD: Technical Outlook

The weekly chart for the EUR/USD says it all: the intermediate-term trend is down, and a bearish bias is warranted. Rates have stabilized around the psychological level of 1.0500.

The Weekly 38% Fibonacci Retracement level at 1.0562 is a key resistance. The 1.0562 – 1.0600 zone has attracted sellers on multiple occasions. Technically, one can build a strong case to hold shorts beneath 1.0562 and build longs above 1.0600.

At press time, the EUR/USD is in compression around 1.0500; the slow conditions won’t last forever, and we anticipate a significant move in the coming days. 

EUR/USD Forecast

Last week, Eurozone CPI actually fell on a monthly basis. While it was a small decline, it still measured a physical pullback in consumer pricing — something that has yet to materialize in the United States. 

Falling inflation ensures rate cuts. Could a dovish ECB send the EUR/USD lower? It’s possible. The CME FedWatch Index now assigns a 70% chance of a ¼ point rate cut at the December Fed meeting; after that, it’s anyone’s guess. 

Given these fundamentals and technicals, par value may be in EUR/USD’s future in 2025.