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Dow Jones Futures Takes a Step Back But Bullish Trend Remains

Dow Jones
Dow Jones

Dow Jones futures have erased earlier gains ahead of the third-quarter earnings season that will kick-off tomorrow. The index is also reacting to the diminishing hopes of additional stimulus in the US and the relatively strong US dollar.

Corporate earnings

The Dow Jones is wavering ahead of the third-quarter earning season that will start tomorrow morning when big banks start delivering their results. This will be an important season because the results will show whether companies are making progress as the global economy recovers. The key companies that will release their earnings tomorrow will be JP Morgan, Citigroup, and Wells Fargo.

For banks, investors will be looking at the overall revenue growth, provisions for bad debt, and revenue from their fixed income and currency trading divisions.

In addition to banks, other companies that will set the tone this week are Delta Airlines, United Health, Infosys, Wipro, and United Airlines, among others.

Stimulus hopes diminish

Dow Jones futures are also falling as hopes of a new stimulus deal diminish. During the weekend, the White House expanded its offer by about $300 billion, a decision that was criticised by both parties. The left argued that the package was not big enough while the right argued that the debt was exposing the US to a fiscal cliff.

Therefore, with the election fast-approaching, there is a likelihood that the two sides will not find a consensus. And, this is a dangerous thing considering that economists have warned about the dangers of not having another stimulus. Worse, with the number of coronavirus cases increasing, there is a possibility that the US could see more weakness for longer.

Dow Jones futures technical outlook

The four-hour chart shows that Dow Jones futures have been on a strong upward trend since September 25, when they were trading at $26,549. At the current level of $28,655, the price is slightly below the intraday high of $28,750. It is also above the ascending pink trendline that connects the lowest levels in September and October. The price is also above the 15-day and 30-day EMA.

Therefore, I suspect that even with the dip today, the price will continue rising as bulls aim for the next resistance level at $29,000. On the flip side, a move below the 15-day EMA will invalidate this trend.

Dow Jones technical chart