Dow Jones crawls back as volatility sinks to March lows; Powell speech eyed

The Dow Jones index rose slightly in the futures market as sentiment improved following yesterday’s selloff. The index is up by about 135 points, with most companies being in the green in the premarket. There are several moving parts in this price action.

Another $3 trillion stimulus

The market is reacting to the “mother of all stimuluses” that is being pushed by Democrats. In a statement yesterday, Nancy Pelosi said that her party had come up with a $3 trillion package that will help cushion the economy. The funds will help companies stay afloat as business activity slows in most states.

The government will also send money to people directly as they did a month ago. Also, the package involves sending money to state and local governments to help them deal with the crisis.

The challenge for Democrats is to get enough Republicans to support the bill. Most Republicans in congress argue that another stimulus is not wise because of the national debt, which stands at more than $25 trillion.

If the package passes, it will bring the total stimulus to more than $5 trillion. This does not include the trillions the Fed has offered indirectly.

Dow Jones rises ahead of Powell speech

The Dow Jones is also rising ahead of a speech by Jerome Powell, the Federal Reserve chair. The most important item in his speech will be about negative interest rates. In a tweet yesterday, Donald Trump said that the Fed should move into negative rates since other countries are in the negative zone.

However, analysts warn that this would be a bad idea because it would punish savers. It would also lower confidence in the United States. Some companies in the Dow Jones like JP Morgan and Goldman Sachs would suffer in a negative rates environment while others like Exxon and Walgreens would benefit. According to CNBC, Powell will reject the idea of negative rates in his speech today.

Notable Dow stocks

Most stocks in the Dow Jones were in the green in premarket trading. JP Morgan rose by 0.25% while higher crude oil prices pushed ExxonMobil up by 90 basis points. Microsoft’s stock rose by 0.47% while Apple rose by 25 basis points.

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Dow Jones technical outlook

On the daily chart, the Dow Jones has found a strong resistance at the 50% Fibonacci and 50-day EMA level at about $24,000. At the same time, the volatility, as measured by the Average True Range (ATR) indicator has started falling. This implies that the index will continue oscillating at the current price ahead of a major breakout. In this, the key points to watch will be the upper and lower levels of $24,915 and $23,000 respectively.

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