Dow Jones Rally Hits A Barrier As Bank Earnings Disappoint; 5% downside possible

Dow Jones futures
Dow Jones

The Dow Jones erased the gains made yesterday as investors focused on the falling oil prices and weak corporate earnings.

ExxonMobil and Chevron were among the worst-performing stocks in the Dow Jones as the price of crude oil declined by more than three percent. Exxon stock declined by more than 3.46% while Chevron declined by more than 3.73% in the premarket. The two companies have opposed measures to reduce oil production in the US.

Banks in the Dow Jones also disappointed. Goldman Sach’s stock declined by more than 2% after the bank released weak quarterly results. The bank’s earnings per share declined by 43% in the quarter to $3.11. This was below the consensus estimates of $3.11. Revenue came in at $8.7 billion, which was slightly better than the expected $8.1 billion.

Citigroup’s stock fell by more than 3% after the company’s profit declined by 46% in the first quarter. This loss was mostly because the company set aside billions of dollars in anticipation of customer defaults. Meanwhile, Bank of America stock fell by more than 3% after the bank’s profit fell by almost 50%. The bank set aside more than $3.6 billion in provisions to cover for potential losses. These results came a day after Wells Fargo and JP Morgan released equally disappointing results.

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Dow Jones Technical Analysis

The four-hour chart shows that the Dow Jones has been on an upward trend since March 23, when it bottomed at $18,115.

As it moved up, the index found some resistance at the 23.6%, 38.2%, and 50% Fibonacci Retracement levels. This retracement is drawn by connecting the lowest and highest levels in March.

The chart also shows that the index has found some significant resistance at the 50% Fibonacci level. This is an important level because it has coincided with the earnings season.

Additionally, the index has formed an ascending triangle. Therefore, I expect a bearish trend to persist if it manages to move below the diagonal line of this triangle. If it does this, I expect it to retest the 38.6% Fibonacci level at $22,432. This will be a 5% downside from the current prices.

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