Dow Jones futures are up for the second consecutive days as traders react to the strong earnings by Nike and KB Home. They are also reacting to news that Johnson & Johnson has started late stage trial for its COVID-19 vaccine. The index is trading at $27,494, which is slightly above this week’s low of $26,638.
There are several catalysts pushing the Dow Jones index high. First, the housing market seems strong as evidenced by financial results by KB Home and the weekly mortgage applications data. In its report yesterday, KB Home said that its revenue for the third quarter increased to $1 billion while gross margin expanded to 19.9%. The backlog rose by 12% to $2.6%.
And today, data showed that mortgage demand increased by 25% from a year ago. Mortgage volume increased by 6.8% last week with refinance demand rising by 9% (and 86% annually).
Second, the Dow Jones is rising because of the positive results by Nike. In a statement, the company said that its online sales rose by 82% in the quarter. Revenue from women increased by 200%. In total, the firm’s revenue rose to $10.59 billion in the quarter, up from $9.15 billion in the previous quarter. As a result, the firm’s shares are up by 13% in the premarket.
Third, the Dow Jones is gaining because of the likelihood that Republicans in Senate will accept Trump’s nominee. This is after Mitt Romney said that he accepted that the president should appoint the nominee. A Republican nominee is thought to be more friendly to businesses.
Finally, the Dow is rising as traders react to news that congress had accepted a bill to prevent a government shutdown.
Meanwhile, the fear and greed index is at 52, which is a sign that investors are neither fearful nor greedy. Still, it is still tilted towards the greed side. Junk bond demand is in extreme greed while put and call options index is in greed zone. Market momentum, stock price strength, and market volatility are still in neutral while the stock price breadth and safe haven demand are in fear zone.
Dow Jones technical analysis
The daily chart below shows that the Dow Jones is in its second straight day in the green. Still, the index is a few points below the ascending blue trendline that connects the lowest points in June, July and August. It is also slightly above the 78.6% Fibonacci retracement level. The price is heading towards the middle line of the Donchian channel.
Therefore, I suspect that the upward trend will continue to about $28,000. At the same time, I expect that the Dow will then resume the downward trend.