DJIA: Bulls still in charge despite Delta-driven 1,000-point plunge and recovery
Matt Weller, CFA, CMT July 22, 2021 1:38 AM
Traders are still trying to wrap their heads around the popular index’s 1,000-point collapse on Monday and subsequent 1,000-point recovery over the last day and a half...
As of writing at the midpoint of the trading week, the widely-followed Dow Jones Industrial Average (Wall Street) is trading near 34,750, within about 50 points of where it closed Friday’s trading session.
So clearly, it’s been a quiet week right?
Bad jokes aside, traders are still trying to wrap their heads around the popular index’s 1,000-point collapse on Monday and subsequent 1,000-point recovery over the last day and a half. The move was ostensibly driven by fears over the spread of the delta COVID variant, and while its impact on developing market economies with slow vaccine rollouts will undoubtedly be severe, the (early) low hospitalization rates among double-vaccinated populations suggests that it’s impact may be limited in more developed markets. In any event, traders are seemingly reassured by the perception that fiscal and monetary policymakers remain on standby to backstop any economic slowdown as needed.
From a technical perspective, the DJIA remains in a longer-term uptrend, with price rising above the upward-trending 50-, 100-, and 200-day EMAs. More recently, the index has carved out a sideways range over the last three months between support in the 33,600 area and resistance up at 35,000:
Source: StoneX, TradingView
Combining the longer-term uptrend with the near-term consolidation, a bullish breakout into record territory is still the more likely scenario; astute traders will be watching for a breakout above about 65 in the 14-day RSI indicator to lead and/or confirm any bullish breakout in the index itself for a potential rally to 36,000 or higher heading into late summer. On the other hand, a confirmed bearish breakdown through the 100-day EMA and range low near 33,600 would point to a deeper retracement toward the mid-32,000s next.
As a reminder, six of the seven largest companies on the planet (Apple, Microsoft, Amazon, Google/Alphabet, Facebook, and Tesla Motors) all report Q2 earnings next week, so that will be the most important fundamental storyline to monitor in the immediate future – see my colleague Fiona Cincotta’s full “Big Tech” earnings preview report for more on these names!
How to trade with City Index
Follow these easy steps to start trading with City Index today:
- Open a City Index account, or log-in if you’re already a customer.
- Search for the market you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.