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Dow Jones Industrial Average: correction can extent to 17,000!

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Dow Jones Industrial Average came off its highs of 17,990 and is now testing the key support level of 17,200, slightly above the psychological level of 17,000. Over the last couple of weeks, the index has moved aggressively downwards, pushing through some significant obstacles, including the 50-period SMA, as well as below the 17,587 and the 17,400 levels. The latter level is quite significant as it includes the 50-period moving average on the daily chart.

However, note that this downward movement has not changed the long-term market trend that is clearly upward, and warns us that this downward movement is simply a correction before the market continue its uptrend trend.

Therefore, I would expect the correction to continue since the MACD fell in a negative territory and is moving below its trigger line. Furthermore, the Stochastic and the Relative Strength index crossed in an oversold territory supporting the assumption of a rebound around the 17,000 level.

Alternatively, if we do see a pullback in the index in the coming days, which I do not foresee, resistance should be found around 17,587, where the 50-period SMA is ready to provide a significant resistance to the index.

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