Dow Jones

Dow Rally Fades Before GDP – Einhorn Sees Top in ‘Enormous Bubble’

Dow Jones futures saw a rally overnight into the early European session but the index has given up those gains to trade below yesterday’s low. The market is waiting for Q3 U.S. GDP which is estimated to be between 30-35%, with the estimate being 31%.

The GDP number comes on the back of a 31.4% drop in Q2 but now that traders are expecting big gains, any undershoot would be bearish in this current market. With virus cases soaring and further lockdowns in Europe, the market is pricing in another hit to the fragile global recovery.

One investor who thinks we have seen the top in stocks is Greenlight Capital Hedge Fund manager David Einhorn. The stock-picker told investors in a recent letter:

“We are in the midst of an enormous tech bubble. September 2, 2020, was the top and the bubble has already popped.” 

Einhorn, who started his hedge fund in 1996, said his firm were now short some “second-tier” names and “some high-flying IPOs” in tech.

Stock markets are taking a hit as virus cases surge, particularly in Europe where France and Germany have both initiated lockdown measures in a threat to the weak global recovery. French citizens will be forced to stay-at-home for four weeks, but Germany has not requested citizens stay house bound. The move could put pressure on other European nations to follow suit and puts the growth picture at risk.

Dow Jones Technical Outlook

Dow Jones futures rallied overnight and into the European session but are now started to see further weakness. The current level of 26,650 is key resistance on the weekly chart and a weaker close into the weekend could see further losses ahead. Traders could go short a bearish close today with a stop above the day’s high. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.     

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