S&P 500

Dow Jones futures are tumbling but technicals point to more upside

The Dow Jones is down by almost 1% in the futures market as traders react to the rising number of coronavirus cases. Other global indices in Asia and Europe also declined. The DAX index declined by more than 1.10% while the FTSE 100 index fell by 1.32%.

Coronavirus worries remain

The Dow Jones, and other global indices rose sharply yesterday as traders remained optimistic about the economy. An editorial at a prominent Chinese newspaper also helped boost the momentum for the stocks. In the piece, the board said that fundamentals in the Chinese economy laid the foundation for a “healthy bull market.”

Today, this sentiment has changed after the number of coronavirus cases in Australia continued to rise. That has led to worries that the country will reinstate lockdowns that were in place two months ago.

This information matters because Australia – together with New Zealand – have been praised for their early efforts to reduce the disease from spreading. Therefore, by having a second wave, it means that there are chances that other countries that have reopened will experience similar cases.

Meanwhile, the number of cases in the United States has remained at elevated levels. In a statement yesterday, Anthony Fauci warned that the situation was getting out of hand. For example, the number of new cases in states like Florida and Texas has continued to rise. On a positive note, mortality rate has been relatively low.

Among the biggest movers in premarket trading were Novavax and Regeneron. In a statement, the government said that it was awarding Novavax $1.6 billion to develop its vaccine. The company will deliver 100 million doses by January next year. Regeneron received a $650 million order from the US government for its therapy.

Dow Jones companies to watch today

There are several companies to watch in the Dow Jones today. First, we will watch pharmaceutical companies like Gilead and Merck as coronavirus concerns remain. Second, energy giants like ExxonMobil and Chevron will be watched because the price of crude oil has declined today.

Third, banks like Goldman Sachs and JP Morgan will be watched because the rising cases increase chances of negative or low interest rates for an extended period of time.

Dow Jones technical analysis

The Dow Jones declined and is trading at $26,101, which is slightly below the intraday high of $26,403. On the daily chart, the price is above the 50-day and 100-day exponential moving averages and the ascending black trend line. Even with the current decline, the trend of the Dow Jones is bullish. Therefore, I expect it to resume the upward trend as traders attempts to target the next resistance at $26,500.

On the flip side, a move below $25,366 will invalidate this trend. This price is along the 100-day EMA and is also along the ascending trend line shown in black.

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