Dow Jones recovered impressively from Tuesday’s announcement that the second round of stimulus will not come until after elections. As a matter of fact, right from the moment the cash market closed, the futures began recovering.
On the chart below, the last vertical drop shows the panic selling into the closing hours. But then, the futures climbed back, and the Dow Jones even made a new marginal high.
At this point, it remains bullish. First, it retested the neckline of an inversed head and shoulders pattern. Second, it put a double bottom at the 26,600. Third, with the stimulus discussions back on track, the Dow looks poised to head for the pattern’s measured move.
FOMC September Minute Focused on More Fiscal Stimulus
Yesterday’s minutes showed that the Fed already priced in additional fiscal stimulus from the Congress. Moreover, it tied the pace of the economic recovery to the additional stimulus and to the moment it will arrive.
More precisely, the sooner, the better. And the bigger, the better.
As Jay Powell said recently, this is not the time to worry about debt. Then why is the stimulus not being released already? Political negotiations are one thing. The elections are just around the corner and who wins control over Congress is equally important as who wins the White House.
Dow Jones Inversed Head and Shoulders
The inversed head and shoulders pattern here speaks of itself. The market broke higher first. Next, it retested the neckline one day ahead of the FOMC Minutes. Finally, it made a new higher high.
This last higher high is the reason why the Dow Jones remains bullish. As long as it continues to build the series of higher highs and higher lows, buyers will keep buying the dip.
Bulls would want to enter at the market and have a stop loss at the Tuesday’s low and a take profit at the measured move.
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Dow Jones Chart
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