After strong rallies in recent weeks, both the ASX 200 and the Dow Jones Industrial Average are pressing against major resistance levels raising the odds of a near-term market pullback. While bullish momentum has been impressive, several warning signs suggest traders may want to brace for a pause or even a dip in the current uptrend.

ASX 200: Bullish Momentum Meets Overhead Pressure

April was a strong month for the ASX 200, with the index gaining 3.4% overall. But that figure masks just how powerful the rally really was: from the month’s low to its high, the index soared by more than 13%. A large bullish hammer candle capped off the month, showing that buyers are still in control. Yet, despite the strength, cracks are starting to form in the technical picture.

On the daily chart, a “hanging man” candlestick appeared on Thursday often considered a warning signal of waning bullish momentum. This formation came just below the 8200 level, an area that lines up with the January lows and the 200-day SMA (8201). That cluster of resistance could prove tough to overcome, particularly with bearish RSI divergence now visible on the short-term oscillator.

While the broader uptrend remains intact, a short-term pullback is increasingly probable. Whether it’s just a pause before a fresh leg higher or the start of something more significant will depend on how price reacts around current support levels.

Dow Jones: Rally Stalls at Major Resistance Zone

The Dow Jones Industrial Average has been on a tear, printing eight straight days of gains a feat not seen since May 2024. But this rally now looks overstretched, with the index bumping up against several key resistance points.

The current stalling zone includes:

• The March swing low
• The March 31st minor high
• A long-term descending trendline from previous market peaks

These overlapping technical levels make this area a critical test for bulls.

Moreover, the RSI (2) is flashing an overbought signal, indicating short-term exhaustion. If momentum fades here, a retracement could easily unfold in the coming sessions. And given the ASX 200’s strong correlation with the Dow, weakness in U.S. markets could carry over to Australian equities.

What Traders Should Watch Next

With both indices perched near potential turning points, here are a few key developments to monitor:

• ASX 200 support levels: Watch the 8000 and 7920 zones as initial pullback areas.
• Dow Jones reaction: A break below the short-term moving averages could confirm a short-term trend shift.
• Economic calendar highlights:
  • Japanese unemployment & BOJ monetary base
  • Australian retail sales and producer prices
  • EU Core CPI
  • U.S. Non-Farm Payrolls and core durable goods orders

These events could easily fuel volatility and determine whether this resistance holds or breaks.

Market Recap at a Glance

ASX 200

• Sixth straight day of gains strongest streak since September
• On track for third consecutive weekly high
• Futures down overnight, suggesting a soft start today
• Telecoms and consumer staples led gains; energy and tech lagged

Dow Jones

• Eight-day rally may be peaking
• Major resistance zone in focus
• Technical indicators suggest momentum is stretched