Dow Jones
Dow Jones recovered from last Friday’s weakness and bounced from dynamic support. Moreover, on its move lower in the last couple of weeks, it formed a reversal pattern – an inversed head and shoulders. Furthermore, the move lower failed to break the higher lows series. Therefore, the logical step is that it will give yet another try to the magical 30,000 number.
Monday saw risk-on conquering Wall Street. Everything was up – oil, stocks, fiat currencies gained against the USD, in a typical risk-on market move.
The ISM Non-Manufacturing release typically comes out during the NFP week. However, this time it followed a trading day after and showed the fourth consecutive month of expansion for the services sector.
The good news was even better. A close look at the report’s details reveals that the employment component entered the expansionary territory, confirming the good news showed by the Unemployment Rate last Friday. As such, the Dow and the other U.S. stock market indices posted strong gains on little market volatility.
President Trump’s returning to the White House also meant business for the stock market. Together with his return, the tweets to support the stock market’s performance are back.
The U.S. election is the main reason why there is little or no volatility in the markets. However, historically, when complacency reigned, the equity markets gained ground.
From a technical perspective, the Dow evolves in a rising channel that started with the March 2020 coronavirus dip. After that moment, the Dow struggled to make a new all-time high, like other indices in the United States did.
However, it is not too late. The price action looks constructive and, as long as the series of higher lows and higher highs remains valid, we should not exclude another attempt above 30k.
Bulls would want to trade at market and place a stop loss order at the lowest point in the inversed head and shoulders pattern. Next, using a risk-reward ratio of 1:2 or 1:3, the 30k level comes as the natural target.
