Resilient Dow Jones Looks to End the Year in Green
FxPro Financial Services Ltd | Nov 22, 2022 07:02AM ET
The Dow Jones index added around 18% to its lows at the start of October and still performing better than the Nasdaq 100 and S&P 500.
The index includes 30 large companies with sustainable businesses, which is very important at a time of rising interest rates and a slowing economy. To oversimplify, business viability and sustainability are not the top agenda for those companies, as it is for many companies in the S&P 500 and Nasdaq 100.
And a look at the DJI's chart confirms its higher potential. The index has been striding resolutely briskly with minor shakeouts since early October. In the middle of last month, it consolidated above the 50-day average in a decisive move.
We saw an impressive battle for the 200-day average in late October and early November. In that battle, the bulls were victorious, making strong intraday moves upward through that curve. And on Nov. 10, this curve was defined as support.
And all this at a time when the S&P 500 has yet to face a similar battle with the long-term trend and has lost its upside momentum on the way up. And the markets can all fall equally fast, but the first to recover are those who lead in the cycle. This rule worked in 2009 and 2020.
On the daily chart, the Dow Jones is hovering around the overbought area, but it is not rushing into it, marking a consolidation of buyer power. At current levels of 33,700, the index is near the site of previous peaks set near 34,000 in August.
If the short-term consolidation this week culminates in a breakout of resistance near 34,000, that would be the final signal that the global downtrend will be broken. If the current coalition turns into a new sell-off, a break-up of the 200 SMA would be a false signal.
However, in the meantime, an upside movement after a pause is a reasonable working assumption. A consolidation above 34,000 might launch a new buying round that would take the index to the next level area at 35,300 before the year's end and allow it to close a year in green.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.