Dow Jones Technical Outlook: Dow Tests Key Confluence Level. Is Another 500 + Point Slide Incoming?

[Redator]

The Dow Jones Index is on the back foot today continuing its bearish trend this week which started with Monday's retreat from the recent highs.

The lack of US data due to the US government shutdown has left markets with few catalysts to look forward to. A host of Federal Reserve policymakers including Fed Chair Powell have also done little to inspire any volatility this week.

Looking at the current Fear and Greed index, and it is hovering in neutral territory as well.

Source: FinancialJuice

Given the current malaise we are seeing in US stocks this week and with the lack of US data releases the technicals and chart patterns that develop tend to be more reliable. Let us take a look at what the Dow Jones chart and technicals are telling us.

Technical Outlook - Dow Jones, S&P 500

From a technical standpoint, the Dow Jones Index on the four-hour chart below has been printing lower highs and lower lows since Friday October 3.

The period-14 RSI has also crossed below the 50 neutral level hinting at a shift in momentum from bulls to bears.

As things stand, price is at a key confluence level around the 46660 mark which was the swing low on October 2 and holds the 100-day MA.

A break of this level could lead the Dow Jones index to decline some 500 points to test the 200-day MA which rests at 46143 with a move beyond that opening up a retest of the psychological 45000.

If the Dow finds support at this confluence level, immediate resistance rests at 46900 before the swing highs at 47050 and 47160 come into focus.

Dow Jones Four-Hour Chart, July 16, 2025

Source: TradingView (click to enlarge)

If the Dow does drop, the move may not be a big one. History suggests the current bull market may still have room to run despite Wall Street's impressive performance over the last few years. Let us take a look.

History Suggests Bull Market May Have More Upside Potential

The current upward trend, or "bull market," in the U.S. stock market is nearly three years old, but historical patterns suggest it might only be halfway through its lifespan.

This bull market officially began on October 12, 2022, when the S&P 500 index hit its lowest point after a period of interest rate hikes by the Federal Reserve. Since then, the index has been soaring, recently hitting a series of record highs, driven primarily by a massive surge in large technology stocks. The S&P 500 is up almost 90% since its 2022 low.

However, this gain is still less than the historical average increase of over 170% for past bull markets, which have typically lasted about five years. Interestingly, the market's performance over the past year (its third year) has been very strong, with a gain of over 15%, marking the strongest third-year performance of any bull market since 1957.

Source: LSEG

Despite the overall strong performance, the market's gains have been very concentrated. While the standard S&P 500 is up nearly 90%, the equal-weight S&P 500 (which shows the performance of the average stock, not just the biggest ones) has only risen 49%. This difference shows that only the largest "megacap" stocks are truly driving the headline index higher.

Some investors are now hopeful that when the Federal Reserve begins to cut interest rates, it will broaden the rally and allow smaller, average stocks to finally catch up.

Now of course this is looking at the S&P 500 but one cannot ignore the knock on impact it has on Wall Street as a whole. The correlation between the S&P500, Nasdaq 100 and the DOw Jones index during the current bull run have been there for all to see. This leaves me thinking that even if there is a lag, the Dow will also benefit from further gains should this bull rally extend for another two years.

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