Dow Jones Recovery Faces One Hurdle as Constituents Surge

Summary:
• The Dow Jones index continued its recovery this week as hopes of a Fed pivot increased. It rose to a high of $34,000

The Dow Jones index continued its recovery this week as hopes of a Fed pivot increased. It rose to a high of $34,000, which was much higher than the year-to-date low of $28,710. Other American indices like the S&P 500 and Nasdaq 100 also continued soaring. 

Dow Jones constituents surge

Most Dow Jones components have made a strong recovery in the past few weeks. Indeed, all of them except Walt Disney have been in the green in the past 30 days. Caterpillar and Boeing stock prices have soared by over 30% in the past 30 days. The two industrial giants rose as inflation pulled back and after positive signs of recovery.

Goldman Sachs stock price has jumped by 27%, making it the third-best performer in the index. The company has done well even as the investment banking division goes through turmoil. Indeed, many investment banks are implementing layoffs. JP Morgan share price has risen by 20% as the bank is benefiting from elevated interest rates.

Oher top-performing Dow Jones constituent companies are Walgreens, IBM, Nike, Intel, and Chevron. On the other hand, only Walt Disney has seen its stock drop in the past 30 days. UnitedHealth, J&J, Verizon, and Microsoft have also underperformed.

The Dow Jones has risen as investors price in a Federal Reserve pivot in the coming months. This pivot will likely see the Fed hike by 0.50% in December followed by smaller 0.25% increases in the first quarter of 2023. This explains why the US dollar index and the VIX have pulled back while the fear and greed index has pulled back.

Dow Jones forecast

The four-hour chart shows that the Dow Jones Industrial Average (DJIA) has been in a strong bullish trend recently. It managed to rise above the key resistance level at $32,513, the highest point on September 12. The index is being supported by the 25-day and 50-day moving averages while the Relative Strength Index (RSI).

Now, the Dow is approaching the important resistance level at $34,290, the highest point since August 16. Therefore, the index will likely continue rising as buyers target the next key resistance level at $35,000. This view will only be confirmed if the index manages to move above the resistance at $34,290. A drop below the support at $33,000 will invalidate the bullish view. For an up-to-date Dow Jones forecast, use our highly-accurate S&R indicator.