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Strong End of the Quarter for Dow Jones, But Bears Wait For A Chance

S&P 500
S&P 500

Dow Jones bounced for the end of the quarter from the possible neckline of a head and shoulders. It regained the 28,000 level on a combination of a flurry of positive U.S. data and post-debate enthusiasm.

However, the first presidential debate was widely criticized by the media. It brought nothing new to the table, and many wonder why there should be another two debates?

The candidates did what they were supposed to do, and their performance fully reflects America today – divided, losing economic power, isolating itself. More interesting should be the debate between Mike pence and Kamala Harris, the two potential future vice-presidents.

Positive U.S. Data Lifting Dow Jones

Most of yesterday’s rally in the Dow Jones came from to the positive data out of the United States. Also, the day started very well, with the ADP (private payrolls) beating expectations. The private sector added almost 750k new jobs in September, fueling hopes for a strong NFP number tomorrow.

Moreover, the Chicago PMI jumped to 62.4 on expectations of 52 – a huge beat that further pushed stocks higher. Finally, even the U.S. final GDP was revised higher, in another positive development for the U.S. economy.

Dow Jones Technical Picture

While the Dow Jones trades with a bullish tone, the technical picture favors a short position. However, because the series of higher lows and higher highs remains in place, indicative of a bullish trend, shorting the Dow should come at half the usual position size.

Having said that, the Dow met yesterday dynamic resistance offered by the projected neckline of a potential head and shoulders pattern. Therefore, contrarian traders would want to short the Dow Jones at market or wait until it reaches 28,400 and target the pattern’s measured move at 24,000. In both cases, the invalidation level is the recent high the Dow made at 29,200 – enough for a solid risk-reward ratio given by a contrarian trade.

Dow Daily Chart