Red flag as the Dow Jones index forms a bearish chart pattern

The Dow Jones Industrial Average (DJIA) index has remained in a tight range in the past few weeks. It has remained stubbornly below the important resistance level at $35,000 this month. It was trading at $34,637 on Monday, much lower than the year-to-date high of $35,653.

The biggest catalyst for the Dow Jones index will be the upcoming Federal Reserve interest rate decision. Analysts believe that the Fed will decide to leave interest rates unchanged between 5.25% and 5.50% in this meeting. 

The meeting will come at a time when UAW has launched one of its biggest strikes in the US. This strike is affecting General Motors, Ford, and Stellantis, the biggest automotive companies in the US.

Further, data published last week showed that the US inflation rose slightly from 3.2% in July to 3.7% in August. Core inflation dropped from 4.7% to 4.3%. The risk is that the rising crude oil and gasoline prices will lead to higher inflation.

The Dow Jones will also react mildly to several important corporate earnings. AutoZone, a leading car seller, will publish its results on Tuesday. FedEx, General Mills, and KB Home will release their numbers on Wednesday. Other important earnings to watch will be FactSet, Darden Restaurants, Stitchfix, and National Beverage.

Dow Jones index weekly analysis

The weekly chart shows that the Dow Jones index has been in a strong bullish trend in the past few months. Along the way, the index has remained above the 50-week and 100-week exponential moving averages (EMA). 

The Relative Strength Index (RSI) has formed an ascending triangle pattern that is nearing its confluence level. Most importantly, the index has formed a rising wedge pattern, which is usually a bearish sign. 

Therefore, there is a likelihood that the index will soon have a bearish breakout in the coming days. If this happens, the next key level to watch will be at $30,000. A break above the resistance at $35,540 will point to more upside.

Dow Jones index daily analysis

On the daily chart, we see that the Dow Jones index is trading at an important level. It was trading at $34,660, the highest level in December. This price was also the upper swing in June this year. 

The index is also slightly above the ascending trendline shown in black. Also, the Dow Jones moved above the 50-day and 100-day exponential moving averages (EMA). 

Therefore, the outlook for the index is neutral for now. A move above the $35,000 will see it jump to the resistance point at $35,670, the highest level this year. On the other hand, a drop below the ascending trendline will see it retreat to a low of $34,000.