With the US recovering from last winter’s freezing temperatures traders are becoming optimistic that the DOW Jones Industrial Index (DJIA) will improve over the next quarter. However, with the US index reaching levels never seen before, how easy will it be to predict how it will perform in the coming months?
Even with the US GDP for the first quarter being reevaluated at a 2.9% annual climb, the recent capital appreciation of a number of stock is encouraging and counters accepted valuation methodology with unusually high P/E ratios. Some investors see this market confidence as a cue to begin booking profits and, with the upcoming Alibaba (BABA) IPO set to reach record highs; you can’t blame traders for taking a bullish approach.
On the other hand the DJIA has been prone to venerability. With the US having political and economic interest worldwide, global event good trigger a slump in the index at a moment’s notice, with Ukraine tensions and recent unrest in Iraq being central to some of the Dow’s poorer periods this year. Conflicts aside, poor economic data from China and major worldwide economies can also lead to a downside in the U.S. Index. It’s also worth noting that recent retreats into the safe-havens of gold and the Japanese yen would suggest a lack of confidence, although this is more likely due to falling treasury yields in the U.S..
As Per our technical analysis of the three major global Indices (FTSE 100, DOW Jones and DAX30), here is what we might see from the DJIA:
Early May saw the Dow Jones attempt to surpass the all-time high of 16,736 however, the market failed to hold onto this level. Owing to the nature of trading in unknown territory, traders relying on technical analysis have found little information to work with. However, recently the index has looked more promising with recent highs breaching 16,900. It is reasonable to assume that the benchmark will face a psychological resistance level at 17,000 – which will require a bullish change in the fundamentals if this point is to be breached.
Medium-term support has been witnessed around the 16,000 and 15,700 levels however less emphasis should be placed on these points as the Dow is presently a fundamentals driven market.
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