Morning Brief: Dow Jones and DAX Index Takes a Breather as Nikkei 225 Rises

Summary:

The Dow Jones and DAX index rally paused as the US dollar index (DXY) and the Nikkei 225 index rose to a new high after mixed economic data

Global stocks are mixed today as investors react to mixed economic data from around the world. In Asia, the Nikkei 225 index is up by 0.95% while the Hang Seng is down by 0.30%. European, futures tied to the DAX index are down by 0.15% while those tied to the FTSE 100 are up by 0.40%. In the United States, the tremendous rally in stocks has taken a breather as the Dow Jones, S&P 500, and Nasdaq 100 are down by 0.10%, 0.30%, and 0.16%, respectively.

Investors are mostly focused on the recent strong economic data from the United States. Yesterday, data from the country showed that private employers added more than 400k jobs in August. Another data showed that factory orders, car sales, and truck sales continued to rise. Before then, data from Markit and ISM showed that manufacturing activity remained being robust in the United States in August.

Later today, we will receive additional data from the country. Among them are the initial jobless claims, non-manufacturing PMI, Challenger job cuts, and nonfarm productivity. Analysts expect these numbers to show that the American economy is relatively stable even as the number of new coronavirus cases continues to rise.

Global stocks are rising even as some investors start to question valuations of companies. For example, in the United States, stocks of companies like Apple, Tesla, and Microsoft have helped power the Dow Jones and Nasdaq. However, the valuations of these companies are incredibly overstretched. For example, Apple is now valued at more than $2.2 trillion, making it more valuable than companies in the FTSE 100.

Away from stocks, the US dollar index (DXY) is continuing its bullish trend. The index is up by 0.20% and is at its highest level in the past few weeks.

Dow Jones futures technical outlook

The daily chart shows that the Dow Jones index has been in a strong upward trend. It is trading at $29,000, which is a few points below this year’s high of $29,597. Even with the weakness that is happening today, the Dow remains in a bullish trend meaning that bulls seem to be in control. The price is also above the 50-day and 100-day exponential moving averages.

Therefore, I suspect that the index will continue rising as bulls attempt to move above this year’s high of $29,597. On the flip side, a move below $27,448 will invalidate this trend.