Dow Jones Futures Flat Under 28k but Breakout is Coming

The Dow Jones index is trading in a tight range between the 27,500 and 28,300 levels and we should see a breakout in one direction soon. The index was 130 points lower and investors seem unsure about what the recent Federal Reserve policy means for stocks.

InvestingCube's S&R Levels

NAS100

NAS100 (11325)

In Profit

STOP

SELL

TP1

11478

TP2

11338

The Fed stated that rates may remain low until 2023 and traders soaked up that assessment, yet failed to consider that would indicate a sluggish growth picture and no tapering of the Fed’s balance sheet, which has ballooned recently after the emergency measures needed to support the economy after the damage caused by virus lockdowns.

Recent data from Yelp suggested that 60% of businesses that were shut down in the U.S. from the start of the lockdown period wouldn’t reopen. As of 31st August, 163,735 businesses in the United States have shut down, with the restaurant sector being the hardest hit. Democrat and Republican politicians were last week at loggerheads over another stimulus bill for the country. A bipartisan group suggested a $1.5 trillion stimulus for the country, but Speaker Nancy Pelosi said that $2.2 trillion was more suitable.  

The global recovery that investors have been touting has been fuelled by this type of emergency funding and the efforts may not necessarily translate to company earnings. Investment giant Blackrock was the latest to warn of a “lost decade” in valuations after Hedge Fund billionaire Ray Dalio made a similar assessment in June.

Dow Jones Technical Outlook

The Dow Jones was lower by 130 points yesterday and today’s futures are showing a minimal gain under the key 28,000 level. The price action in the last week has been defined by a rectangle range between 27,500 and 28,300. A breakout of this range will be coming and should signal a more defined trend with the 50-day moving average at the support levels also. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.   

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Dow Jones Daily Chart

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