Brief: Dow Jones Forms Rising Wedge as Fear and Greed Falls to 65

US stocks ended lower yesterday as investors reacted to the overall stronger dollar and the rising political tensions in the United States. The Dow Jones declined by more than 90 points while the S&P 500 and Nasdaq 100 index fell by almost 1%. At the same time, the fear and greed index has moved from extreme greed to the greed level of 65. 

What happened: In the US, the Democrats unveiled their second impeachment probe against Donald Trump yesterday. At the same time, technology giant companies like Amazon, Facebook, and Google continued their crackdown against conservatives, raising worries of more regulations. Also, there is the risk of a rising number of coronavirus cases in the United States, Europe, and China. 

What next: The Dow Jones and S&P 500 have jumped in the futures market ahead of a speech by Joe Biden, who will unveil his stimulus plan on Thursday. Economists expect him to launch a package worth more than $3 trillion which will include stimulus checks. Such a deal will be bullish for US stocks. 

What about fear and greed: The closely-watched fear and greed index has moved to the greed zone. The stock price strength and market momentum are in the extreme greed zone while the stock price breadth, put and call options and safe-haven demand have turned to greed. Market volatility and junk bond demand are in the neutral and fear zones. 

Dow Jones technical outlook

On the daily chart, we see that the Dow Jones index has been in a steady upward trend. It has formed what seems to be a rising wedge pattern, which is usually bearish in nature. Also, the price remains above the 25-day and 50-day exponential moving averages. Therefore, there is a possibility of a sustained downward pullback as the January effect starts to conclude.

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Dow Jones Daily Chart

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