Indices Market Update – Dow Jones

*An update on my current Dow Jones Index trade positions and my future price predictions*

In this blog post I will show my current open trade positions on the Dow Jones Index, why I entered the positions where I did and what I think price will do over the next few days and weeks.

As always, all of my technical analysis is done using the TradingView platform which is cloud based, can be accessed from any device and has all the functionality and features that I need. Check out their website by clicking on the link below.

Let’s start by looking at the current 4 hour intraday timeframe chart and I will show you my current long positions on the Dow Jones Index.

Dow Jones Index 4 hour timeframe chart

I currently have 2 long positions open on the Dow Jones index and have been trading the recent bull run for almost 2 weeks now. The long term trend for this index is definitely bullish and any pullbacks in price are swiftly being met by more new buyers.

There are a few reasons for this. Firstly, there is no reason for US stocks to sell off in a dramatic fashion. There have (and always will be) lots of rumours of a recession with US debt levels rising and stocks being “overpriced” but that alone is not a reason to expect a recession right now.

Stocks have been called overpriced since the dawn of time because naturally they increase in price as time goes on. Much like the cost of a loaf of bread, inflation causes the prices of stocks to rise and Index’s will replace stocks that lose a lot of market cap with new up and coming stocks.

The second reason people keep calling for a recession immeidately is because of the increased levels of debt and borrowing in the USA.

The levels of US debt (measured as a % of GDP) are at their highest since World War 2 but that is not a major problem. The US Dollar is still used as a global reserve currency. It is why you will see many 3rd world countries preferring to accept it over their own currency and it is used as the base for Crude Oil and Gold valuations so the demand for US dollars will almost always be apparent.

US Debt (% of GDP)

Many people say Gold or Bitcoin is the next major backup for currency when the recession hits but the simple fact is that you can’t pay for anything with gold. No business is going to accept gold in exchange for food & water, rent, mortgage payments or utilities bills. And bitcoin is about as stable as 2 legged donkey.

My trade entries:

My first long position entry developed from a quick day trade I planned and entered last week. I entered a very tight stop loss, short duration trade with a reasonable reward:risk of just under 3R.

Dow Jones Index 15 minute timeframe chart
(trade entry 1)

I spotted a good daily buying trend appearing. Price had rejected a major support zone at $28,150 and from there it one ton to make nice higher highs and higher lows through the follow 4 days of trading. I entered long on the bounce of the bullish trendline and 50 EMA.

I closed a good percentage of my position at my first profit target which is shown on the chart above. However there was strong bullish momentum and I am still holding a portion of that initial long trade position open.

Dow Jones Index 4 hour timeframe chart
(trade entry 2)

My second long trade position was entered on Monday morning after price had made a clear higher higher low and bounced off of the intraday support/resistance zone at $28,900. There was a strong 4hr bullish wick rejection candle closure and price closed above the support zone and 50 EMA.

Both trade entries are just very simple trend continuation entries with good reward:risk ratios.

Fundamentals & data:

Later today we have the U.S Crude Oil inventories data being released. This shouldn’t move the Dow Jones Index unless a shock figure is announced. Theoretically if inventory levels are massively increased then the price of Crude will fall dramatically and this will pull stocks down. The opposite can be said if Crude Oil price rises sharply.

This evening (7pm GMT) there is the US monthly budget statement for JAN 2020 but this shouldn’t move markets in a major way. However, you may see some short term volatility moves.

The main mover of markets this week will be the USD consumer price index data that is being released tomorrow afternoon. Inflation can be a double edged sword because it can stimulate job growth and as we have seen recently, the US job market is still growing rapidly. However, inflation can also effect corporations and their profit levels because it costs more to purchase goods/materials used for production.

We also have the ongoing global issue of the Corona Virus. it initiated the last big sell-off on global indices at the end of January and the related headlines will continue to influence the markets.

Long term price predictions:

Dow Jones Index daily timeframe chart
(price predictions)

If price continues to climb today then I would like to think there is enough momentum to break through the $29,500 resistance zone. If this happens then I see no reason why new all time highs won’t be achieved and a significant daily/4hr higher will made.

Dow Jones Index 4 hour timeframe chart
(price predictions)

Long term profit targets are set at $29,800 which is a higher high for price. From there, if that level breaks then the key psychological level of $30,000 is next in line. I know there are a lot of professional and institutional traders wanting to see “Dow to $30k” and I am certain Mr Trump wants to see stocks climb right up until he is re-elected.

The alternative scenario is that price finds more resistance at $29,500 and begins to drop off. This is not a major issue and I will likely look to take some more profits if rejections of that price zone begin to appear.

Useful Links:

All my technical analysis is done using the TradingView platform. You can get access via the link below.

My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.

FTMO Trader Funding Programme.

Thanks for reading and please don’t forget to LIKE, SHARE and FOLLOW my blog to stay up to date with the latest market analysis and trading education posts.

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

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