Are Dow Jones futures heading for 25,985, ask IG analysts?
The Dow Jones Industrial Average has been on a tear over the last five months, with the index hoping to return to pre-crisis levels like its Nasdaq and S&P 500 counterparts, but its recovery has had a few hiccups.
The Dow has been on an impressive run over the past five-months, with the index hoping to follow its Nasdaq and S&P 500 counterparts in recovering the entire of the 2020 selloff, according to Josh Mahony, senior market analyst at IG.
However, the rise is not without bumps in the road, with a number of retracements coming into play along the way, he said. This sets the current decline into some context, with the move largely looking like yet another retracement set within a multi-month uptrend.
‘This means the current period of weakness could provide a good buying opportunity to get long at a more advantageous price,’ Mahony added. ‘However, that theory only holds if we remain above the July swing-low of 25986.’
‘Should we break back below that level, it would point towards a wider bearish reversal coming into play. However, until that happens, the bullish trend remains the prominent driver of price action over the medium term.’
Dow Jones trading sideways as tech unable to offset wider US economic woes
The Dow Jones is trading flat in early morning trading on Thursday, with stand out performances from American tech giants like Apple, Amazon and Microsoft unable to alleviate investors’ concerns about the wider US economy.
Apple became the first company to achieve a market valuation of $2 trillion this week after the tech stock broke above $468.35 per share.
But disappointing unemployment data and the Federal Reserve’s dim outlook for the US economy have stopped the index from trading higher this week. In fact the central bank warned that ‘the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term’.
Rising US-China tensions is also weighing on the Dow Jones too. However, a dialogue between the world’s two largest economies is set to reopen soon after China’s commerce ministry said that officials from Washington and Beijing will resume negotiations in the a matter of days.
Dow Jones: technical analysis
The Dow has finally broken through the 27622 support level, following a period of consolidation over the past week, according to Josh Mahony, senior market analyst at IG.
‘Given that break, there is a strong chance we will see another move lower from here, as the index seeks to retrace some of the rally from 25985,’ he said.
‘With that in mind, another move lower looks likely before long, with that bearish short-term outlook in place unless we see a break through the 27920 level,’ Mahony added.
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