Dow Jones Still in Trouble as Fear and Greed Index Stumbles

Summary:
• The Dow Jones index futures rose on Tuesday as the earnings season got into high gear. The index is trading at $31,072

The Dow Jones index futures rose on Tuesday as the earnings season got into high gear. The index is trading at $31,072, which is about 4.72% above the lowest level this year. However, the price is 16% below the highest point in 2022, while the fear and greed index has moved to the fear level of 30. 

US earnings continue

The Dow Jones index has done relatively well in the past few days as America’s big banks have delivered their results. Most banks, including JP Morgan, Morgan Stanley, and Bank of America, reported their revenue and profitability dipped in Q2. They blamed this on the dramatic decline of investing banking division as the number of deals slowed.

The earnings season will continue this week as some important companies publish their results. The most notable ones are firms like Tesla, Netflix, IBM, Hasbro, Biogen, Abbott Labs, and Kinder Morgan, among others. Most of these companies will report weak results because of the soaring inflation and the impact of the stronger US dollar. 

The dollar has been in a strong bullish momentum in the past few months. It even soared to the highest level in 20 years last week. As a result, many Dow Jones constituents that make a lot of money abroad will be impacted. Coca-Cola, Johnson & Johnson, Procter & Gamble, and Cisco are some of those companies.

Investors are still fearful, according to the closely-watched fear and greed index. The index is currently at 30, which is sharply lower than the neutral point of 50. Therefore, analysts believe that a full recovery will be confirmed when the index moves above 50. At the same time, the important VIX index is trading at 25, which is below the 25-day moving average.

Dow Jones forecast

The four-hour chart shows that the Dow Jones index has been moving sideways in the past few days. However, the index remains slightly above the year-to-date low of $29693. This price is between the descending channel that is shown in blue. It is also at the same point as the 25-day and 50-day moving averages, while the Relative Strength Index (RSI) moved slightly below the neutral point.

Therefore, the DJIA will likely pull back since it has found substantial resistance at $31,717. As such, the next key point to watch will be at $30,000. A move above $31,717 will invalidate the bearish view.