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Morning Brief: Dow Jones and DAX Index Bearish Trend Sees No End

Dow Jones futures
Dow Jones

US stocks continued their downward trend yesterday, with the Dow Jones erasing more than 500 points. The S&P 500 and Nasdaq 100 also declined and the trend is continuing in the futures market. The three indices are down by 0.15%, 0.20%, and 0.35%.

The same weakness is happening in Asia, where the Hang Seng, China A50, and Shanghai composite are down by more than 0.75%. In Europe, futures tied to the DAX index are down by more than 0.40% while those tied to the FTSE 100 and Stoxx 50 are up by about 0.50%.

In general, most assets are falling today, with crude oil price continuing yesterday’s plunge. The only positive assets are gold, silver, and copper that are up by more than 0.50%.

There are several moving parts in this price action. In Europe, the main indices are falling because of a new wave of the coronavirus pandemic. For example, the UK has reported more than 8,000 new infections in the past two days. And, in a warning, the Chief Medical Officer (CMO) warned that the cases could reach 50,000 per day in October. That has led the Boris Johnson administration to impose some strict “circuit breaker” measures.

There are also geopolitical risks between the United States and China. According to the Wall Street Journal (WSJ), the Chinese government has created a set of companies that it will add in its entity list. These firms will be forbidden from investing in China and also from buying and selling its products to the country. Most of these firms are in the tech industry but they could also include banking groups like HSBC and Standard Chartered. Cisco is a member of the Dow Jones index.

The Dow Jones and other global indices are also falling because of the political tensions in the United States. With most people voting by mail, there are concerns that the country could have a contentious election season. Meanwhile, these divisions have affected financial support from congress. And recent data show that business activity has started to suffer after the boosted jobless claims funds expired.

Dow Jones technical forecast

The daily chart shows that the Dow Jones did an important thing. It not only fell to its lowest level since August 6, but it also moved below the important ascending trendline that is shown in blue. Most importantly, it has moved below the neckline of the head and shoulders support, which is usually a bearish signal.

Therefore, I suspect that the index will continue falling as bears target the next important support at $26,000. But, it is worth noting that the index may move to retest the ascending trendline before it continues with the downward trend.

Dow Jones Daily Chart

Dow Jones