DJIA: Record Highs in Sight After Better-Than-Expected Q2 Earnings Season

The Dow’s near-term bias remains to the topside as long as the index holds above the previous breakout level at 26,400.

You’d never guess it amidst the latest headlines that the The We Company (WeWork) may be looking to postpone its highly-anticipated IPO or that job creation in the US is slowing, but major US indices are actually within 2% of their all-time highs.

While there are concerns about a potential slowdown in global growth heading into the end of the year, US corporations continue to thrive. According to the earnings mavens at FactSet, 75% of S&P 500 companies beat their Q2 earnings estimates and 57% of companies have reported better-than-anticipated revenues. While corporate earnings overall declined by -0.7% for the quarter, the decline was smaller than expected as the tailwind from 2018’s big tax cut faded.

After pulling back from record highs in late July, the Dow Jones Industrial Average formed a well-defined, 1,000-point sideways range between 25,400 and 26,400 throughout August. The index has now broken out above that area, completing a healthy correction within this year’s uptrend, and appears poised to retest the all-time high near 27,400. Meanwhile, the RSI indicator has formed a clear near-term uptrend of its own after briefly touching “oversold” territory below 30 last month, signaling that the momentum increasingly favors the bulls:

Source: TradingView, FOREX.com

Moving forward, the Dow’s near-term bias remains to the topside as long as the index holds above the previous breakout level at 26,400. Needless to say, a confirmed breakout above 27,400 would be a sign of strong buying pressure and could open the door for a move above 28,000 in time. Only a break back below 26,400 would shift the near-term bullish bias back to neutral from a technical perspective.


Disclaimer

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.