Dow Jones Hits New Record Highs! Can It Sustain Its Rally Amid Risk Aversion?

While the Dow Jones Industrial Average Index closed over 330 points or 1.16% higher to 28,868.8 yesterday, it would seem that the stock index has a bearish road ahead of it today. Dow Jones CFDs dropped like a rock in today’s Asian session as risk aversion dominated market sentiment. The stock index initially tapped new historic highs at 28,918.6 before aggressively falling more than 358 points to 28,558.1.

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NAS100

NAS100 (11163.8)

In Buy Zone

STOP

BUY

TP1

11479

TP2

11923

Risk Aversion to Dominate Today’s Trading?

The sell-off was across other equities markets with the Nikkei 225 and Hang Seng index also suffering losses in today’s morning session. Risk aversion dominated this morning’s trading. This was brought about by news that the US killed Iranian General Soleimani in an air strike attack in Baghdad airport. He was a key military official in the Middle East who was said to have approved the attacks to the US embassy in Iran last week.

Investors are now at the edge of their seats after Iran warned against a retaliation.

Yesterday, gains on the Dow Jones were led by Boeing with a 7.56% uptick. Apple came in second with a 6.70%. Gain. In third was Goldman Sachs with a 4.39% profit. If risk aversion carries on to the New York session, it will be unlikely for these stocks to extend their gains in today’s trading. However, we do have some reports from the US that could help provide equities market with some support.

ISM Manufacturing and FOMC Meeting Minutes Due Today

Later today, we do have the US ISM manufacturing PMI report for December due at 3:00 pm GMT. It is seen to come in at 49.0 for the month. Meanwhile, the FOMC meeting minutes of the Fed’s most recent meeting is due to come out at 7:00 pm GMT.

Better-than-expected data or optimistic FOMC minutes could be bullish for stocks. On the other hand, disappointing data or a pessimistic Fed could only fuel the sell-off even more.

Read our Best Trading Ideas for 2020.

Dow Jones Outlook

On the hourly time frame of Dow Jones CFDs, we can see that the uptrend on the index is still intact. Connecting the lows of December 10, December 11, December 12, and December 31 shows that the Dow could pullback to support at the rising trend line at 28,557.0. This price also seems to coincide with the 61.8% Fib level when you draw from the low od December 31 to today’s high. If support at this price does not hold, we could see the Dow Jones fall to 28,036.0 where it previously hit resistance.

On the other hand, reversal candles around the Fib levels could mean that the stock index is on its way to retest its highs around 28,900.0.

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