Strong Retail Sales Push Dow Jones Higher –New All-Time High Possible?

Summary:

Dow Jones remains bullish and threatens to break to a new all-time high after the strong Retail Sales data from last Friday.

Dow Jones still struggles at the highs but seems poised to make a new all-time high. September retail sales numbers crushed expectations, likely supporting another attempt at the highs.

2020 has been a tough year so far. The initial market reaction to the pandemic triggered a wave of responses from central banks and governments. The result? A strong bounce from the lows, with the Dow Jones literally little or unchanged for the year.

September 2020 US Retail Sales Exceeded Expectations

Last Friday’s retail sales data crushed the market’s expectations. The actual number, 1.9%, exceeded the expectations by almost three times. What was the driver behind such strong data?

As it turned out, the savings rate declined in September. It means that Americans started to spend the saved part of the aid they received during the summer months. As a reminder, most Americans received between $300 and $600 a week, and most of it was spent immediately. However, as suggested by the high savings rate, some parts were saved for later consumption, and that is the impact we have seen on the September retail sales data.

If we look at the details, Americans spend on cars, sports goods, and discounted clothing. Cars are the new thing all over the world because people want to avoid public transportations due to pandemic.

Dow Jones Technical Levels

The easiest way to look at the Dow Jones from a technical perspective is to consider the price action for the entire year so far. Ahead of the U.S. elections, it is unlikely that the Dow Jones will not try at the highs.

Therefore, the bias remains bullish, with the condition that the series of higher lows is not broken. We can also spot an inversed head and shoulders pattern with the measured move pointing to a new all-time high as well. To use a proper risk-reward ratio, bulls should project twice the distance from the entry to the previous higher low.