Dow Jones
Dow Jones futures are up slightly as focus remains on US bank earnings. The futures are up by 0.20%, partially erasing yesterday’s 100+ point loss. Similarly, other US indices are barely moved, with the S&P 500 and Nasdaq 100 futures trading at $3,505 and $12,106, respectively. At the same time, the fear and greed index is showing that investors are getting a bit greedy.
The biggest catalyst for the Dow Jones futures is corporate earnings from the biggest banks in the United States. Yesterday, results from JP Morgan, the biggest bank in the United States showed that revenue and profits rose in the third quarter. The same was true for Citigroup, which reported better earnings and profits.
Today, the Dow Jones will react to results from banks like Goldman Sachs, Bank of America, and Wells Fargo. Like their counterparts yesterday, analysts expect that these firms will report better revenues and profits as they set aside less money to loss provisions.
In addition to banks other firms that will release their earnings today are UnitedHealth, US Bancorp, and PNC Financial.
Dow Jones futures are also reacting to the evasive Covid-19 vaccine. In a statement yesterday, Johnson & Johnson said that it hoped that its trial will return in the near future. Still, risks that its vaccine will be delayed will remain until the company finds a new vaccine. The same is true with Eli Lilly, which was forced to pause tests of its antibody yesterday.
Meanwhile, the fear and greed index, which is a good barometer of the state of the market is at 59. This is a sign thar investors are getting greedy. This is a sharp contrast to where it was last week when investors were relatively fearful.
The main reason why the index is at 59 is that junk bond demand, market momentum, and put and call options have all moved to the extreme greed zone. This has been offset by the market volatility index and the stock price breadth that are in the neutral zone. The stock price strength and demand for safe havens is in the fear zone.
With the fear and greed index at 59, it sends a signal that the Dow Jones and other US indices could continue rising until it gets to the extreme greedy zone at about 70.
The daily chart below shows that Dow Jones futures have been on an upward trend recently. As this has happened, the index has formed an ascending parallel channel that is shown in blue. The price remains above the 25-day and 15-day EMAs. It is also above the 78.6% Fibonacci retracement level and slightly below the YTD high of $29640.
Therefore, based on this trend and the fear and greed index, I expect the index will continue rising in the near term. On the flip side, a move below the psychological level of $28,000 will invalidate this trend.
