Risk-Off Sentiment Caps Dow Jones Gains - Summary
Risk-Off Sentiment Caps Dow Jones Gains
Author: Razan Hilal, CMT
Date: February 20, 2026
Key Events
Risk-off sentiment is increasingly evident in US markets, driven by several factors:
- Extended forecasts for Fed rate cuts are limiting gains across US indices amidst ongoing geopolitical uncertainties.
- The US Advance GDP growth has slowed significantly to 1.4%, down from 4.4%.
- The Dow Jones is fluctuating between 49,000 and 49,600, with these levels being crucial for determining the next market direction.
- Ongoing tensions between the US and Iran are keeping crude oil prices elevated, which could lead to inflationary pressures and further stock rotations into defensive sectors.
The decline in GDP and concerns over AI sector valuations are contributing to a defensive market trend, capping Dow Jones gains below the 49,600 mark.
Technical Analysis: Quantifying Uncertainties
The Dow Jones outlook is analyzed through daily and monthly time frames:
- Recent drawdowns are respecting Fibonacci retracement levels, with key support levels identified at:
- 49,200 (0.272 retracement)
- 48,700 (0.382 retracement)
- 48,000 (0.500 retracement)
- 47,500 (0.618 retracement)
- A potential wider drawdown could see the index approach 45,700, which aligns with previous resistance levels from late 2024 and early 2025.
- A breach below 45,700 could indicate a transition into a more severe corrective phase.
- Conversely, a close above 49,600 and 50,600 would signal a revival of the primary bull run.
On a monthly basis, the Dow Jones has shown a rebound from 2020 lows, but caution is warranted as the monthly RSI indicates overbought conditions, reminiscent of previous periods that preceded significant drawdowns.
Overall, the current market sentiment reflects a cautious approach, with key technical levels and economic indicators playing a pivotal role in determining future market movements.
Informational only. Not investment advice.