Opening Bell: Dow Jones Set To Test $20,000 As Stimulus Deal Nears

dow jones
dow jones

The Dow Jones Industrial Average (DJIA) is set to rise by more than 900 points as investors remain optimistic about a stimulus package being discussed in Washington.

According to the Washington Post, Republicans and Democrats in congress are nearing a deal that will provide financial support to households and companies. The deal being negotiated will give up to $1,200 to American adults and about $500 to children. In addition, it will create a fund to give grants and loans to big and small companies.

Senate Democrats have blocked a bill being proposed by Republicans twice before. They argue that it will be a mistake to give handouts to big companies without any supervision. They also want to protect American workers from being laid-off. Importantly, they want to ensure that companies don’t use the funds to pay dividends and share buybacks.

Investors are also optimistic about the decision by the Fed’s open-ended quantitative easing program. This program could leave interest rates at ultralow levels for a long time, which is positive for companies.

Among the biggest movers in the Dow Jones are Boeing, which has risen by 10% in premarket trading, 3M, Johnson & Johnson, Chevron, and ExxonMobil.

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Dow Jones Technical Analysis

The Dow Jones index is set to open at about $19,520 if the futures remain unchanged. As we can see on the four-hour chart, the index has been on a strong downward trend and the previous upswings have produced dead cat bounces. I see today’s gains holding as participants anticipate positive news from Washington. If this happens, the index could test the 78.6% Fibonacci Retracement level at $21,000.

On the flipside, since we are in days of volatility, the index may also turn lower. If this is the case, I see it testing the October 2016 low of $17,827.

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