American indices are in freefall, with Tuesday’s session bringing a slight reversal. However, this does not appear to be the start of a new uptrend, nor does it signal the end of the ongoing drop. Instead, this minor bounce looks more like a take-profit move rather than a true shift in sentiment. The overall trend remains negative, and the technical picture suggests that more downside is likely.
For Dow Jones in particular, the price action is developing at a crucial juncture. The index has already broken below the long-term uptrend line, marked with a green trendline, signaling significant weakness. The last line of defense for the buyers is the key horizontal support around 41,700 points, highlighted in blue. This level was an important support in the middle of January and also played a key role at the beginning of November. Now, it is being tested again, with visible reactions from buyers attempting to hold the line.
Despite some initial demand and long-tailed candlesticks indicating buying pressure, this bounce appears temporary. The broader market sentiment remains bearish, and the probability of a continued decline is high. However, as long as the price remains above the blue support, traders can consider short-term long positions with a favorable risk-to-reward ratio. But the real game-changer would be a daily close below this level. Such a breakout would be a strong confirmation of further downside, opening the door to deeper losses.
In summary, the Dow Jones is at a critical crossroads. Buyers are making an effort, but the bearish pressure remains overwhelming. If the blue support level fails to hold, it could trigger a significant selling wave, reinforcing the already dominant negative trend. The coming sessions will determine whether this is just a temporary pause in the downtrend or the beginning of an even sharper sell-off.