DJIA Continues Its March Toward 30,000

Posted Wednesday, February 5, 2020 by
Shain Vernier • 2 min read

Don’t look now, but 30,000 is approaching quickly for the DJIA. Values are trending higher once again, extending early-February gains. At nearly the halfway point of the U.S. session, the DJIA DOW (+365), S&P 500 SPX (+31), and NASDAQ (+35) are ripping higher. The reasons behind the rally are optimism over containment of the coronavirus and bullish spikes in IBM (+4.5%) and United Health (+4.75%).

In a Live Market Update from yesterday, we talked about the tendency for the DJIA to lose the day after President Trump’s State of The Union Address. This hasn’t been the case today, as traders continue to pile into American stocks. With a Senatorial acquittal vote expected to come later today, it looks like the Trump impeachment hearings are winding down. 

Also, there are reports surfacing that suggest large scale divestments in China stemming from the coronavirus. Data service EPFR is stating that US$387 million was withdrawn from Chinese equities from 27-31 January. Given this week’s strength in U.S. stocks, it appears that a good deal of this capital has found its way to Wall Street and the DJIA.

DJIA Rallies Above 29,000

From an intermediate-term perspective, the bullish trend in March E-mini DOW futures remains intact. Bids continue to hit the market and prices are on the uptick following last week’s coronavirus scare.

March E-mini DOW Futures (YM), Weekly Chart

The weekly chart above is a look at the March E-mini DOW as of the closing bell Tuesday. At this point, prices continue to rally and are challenging the All-Time Highs at 29,362. As we roll toward late-week trade, there are two levels to pay attention to in this market:

  • Resistance(1): Swing High, 29362
  • Support(1): 62% Of December/January Range, 28086

Bottom Line: Today’s strength in the DJIA doesn’t come as much of a surprise. Given the pending Trump acquittal and optimism regarding containment of the coronavirus, it looks like traders are breathing a sigh of relief. If values continue to rise, a shorting opportunity may set up from just beneath the Swing High (29362) in the March E-mini DOW.

Until elected, I will have sell orders in the queue from 29,344. With an initial stop at 29,366, this counter-trend trade produces 44 ticks on a 1:2 risk vs reward management plan.

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