Dow Jones aims the key, long-term support

In two days, indices erased almost all losses from November and the first half of December. That hawkish stance from the FED and ECB was a real mood killer for the stock traders and the full, bearish correction is now a fact. Let’s take a look at the chart of what the technical analysis is telling us about the current correction and its possible target.

We can see that the recent uptrend, started with a very handsome double-bottom formation (blue). After the price broke the neckline of this pattern (yellow), the price was surging almost every single day, reaching the local high at the beginning of this week. The recent drop driven by the central banks is currently aiming for a very important resistance, which is the 38,2% Fibonacci of the most recent upswing and 23,6% Fibonacci of the post=Covid uptrend (pink). In addition to that, we do have an upper line of the falling wedge pattern, which was controlling the whole 2022 downtrend.

It is crucial for the buyers to stay above that area. Price dropping back inside of the wedge would be a serious sell signal, which would jeopardize the whole Santa Rally concept. On the other hand, a bullish bounce off such great support would be a promising buy signal for the rest of the year. Next week, will show us the direction.