Dow Jones Index Creep Up As Technicals Warn Of Stinging Pain Ahead

Dow Jones
Dow Jones

The Dow Jones index rose slightly as investors reacted to the newly passed $484 billion stimulus package. Investors also reacted to the rising oil prices and optimism that coronavirus cases will start falling.

Dow Jones rises after stimulus bill passed

The Dow Jones index rose after congress passed the $484 billion stimulus package yesterday. This package brings the total amount of stimulus offered by the government to more than $2.6 trillion. The Federal Reserve has also been printing money at the quickest rate in history. It is doing this through its open-ended quantitative easing program, which has seen more than $2 trillion printed in the past few weeks alone.

The bill that was passed yesterday will provide about $310 billion to the Paycheck Protection Program while $60 billion will go to the Small Business Administration (SBA). An addition $75 billion will go to hospitals while $25 billion will boost testing.

Oil prices boost the Dow Jones

The Dow Jones index also received a boost from crude oil prices. The WTI rose by more than 17% to about $17 while Brent rose by 4.3% to about $22 per barrel. This is the third straight day of gains in the crude oil market following the meltdown we experienced early this week. Still, as I wrote earlier today, there are signs that this rally could make a pullback in the near term.

In response to the rally, Chevron and ExxonMobil, which are members of the Dow Jones rose by more than 2%.

Boeing was the laggard in the Dow

Boeing was the worst-performing company in the Dow Jones after the company announced plans to cut production of the popular Boeing 787 plane. This is happening at a time when most airlines around the world are struggling.

In Australia, Virgin Australia has moved into administration while Richard Branson is fighting to save his UK brand. In South Africa, the government has given up on the South African Airlines. Also, Boeing is still fighting to save its Boeing 737-Max plane, which has been in trouble since last year.

Other laggards in the Dow Jones are American Express, Intel, Johnson & Johnson, Verizon, Visa, and Disney. On the other hand, the best-performers are Home Depot, Chevron, ExxonMobil, and IBM.

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Dow Jones technical analysis

On the four-hour chart, we see several things. First, we see that the Dow Jones index has been on an upward trend since March 23, when it was trading at $18065. Second, the pair has been rising while forming an equidistance channel. Third, the stock is now stuck at the 50-day exponential moving average. It is also slightly above the 100-day EMA.

Finally, we see that the price has found some resistance along the 50% Fibonacci retracement level. This retracement connects the YTD high and low.

Looking at the channel, we see that the price has found some support at the lower side. Because of where the consolidation is, I expect the price to break-out in the lower side. If this happens, the first stop will be the 38.2% retracement level at $22,425.

On the flipside, there is a possibility that bulls will attempt to retest the upper side of the channel. If this happens, the index could test the upper side at $24,400.

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