Dow Jones Forecast: US stock indices have been negative this week. If the positive impulses during the US reporting season fail to materialize, the weak momentum could continue for the time being. The chart is already testing the trend.
DOW JONES FUNDAMENTAL FORECAST
The initial applications for unemployment benefits continued to fall last week, but still exceeded the 1. million mark. If we take into account that the continued applications include only those who are permanently unemployed and not those who are only temporarily unemployed, the real number of unemployed is likely to be much higher. This is a clear divergence from the Non Farm Payrolls, which, unlike the counting of unemployment statistics, is determined in a telephone survey. So the question is, how much longer do market participants need to realize the gravity of the situation?
We may be in for a very nasty surprise next month as far as Non Farm Payrolls are concerned. For the time being, however, the upcoming reporting season will attract attention (Dow Jones, SP500, DAX Q2 Results Outlook). As always, the banks will start on Tuesday. Wells Fargo will be one of them. One of the largest US banks has already announced that it will cut thousands of jobs during the year. On the one hand, this may be positive for the stock in the short term, as costs are reduced, but for the jobs mentioned above, the situation looks correspondingly different. Wells Fargo is not the only large company that has announced large-scale layoffs.
DOW JONES FORECAST CHARTTECHNICAL
Some surprises should not be ruled out, as corporate earnings forecasts have been very negative since the beginning of the second quarter. The lockdown loosening that has temporarily contributed to the temporary recovery could be accompanied by exceeded forecasts. Thus, WallStreet and Trump could once again have a temporary reason to celebrate.
But there will not be much to rejoice about as long as the infection rates continue to rise cheerfully. Contrary to Trump’s statements, the number of deaths is also rising in the individual states. On the basis of individual values, it can be seen that technology stocks are largely responsible for the current stability. This makes the whole thing still fragile. The narrow market breadth that we saw in the post-crash recovery, which nevertheless held up well, may no longer be present in the second test.
From a chartist’s perspective, the Dow Jones Index currently looks a bit delicate. Although the recovery trend is still intact, it is now being tested again, see the chart below. The lower trend line coincides with a strong support line that extends to 25,300 points. Thus, if possible, this zone should not be breached in order to keep the trend intact. The 48-day moving average also runs within this zone and has not yet been breached. On the downside, the next target might be in the 38.2 Fibonacci level, at 24,300.