In recent sessions on Wall Street, we have seen an impressive rise in the 'American' bull market marauders, of course the Russell 2000 Index (US2000) and the Dow Jones Industrial Average (US30). Both indexes have been clearly 'pulling away' from the Nasdaq 100 or S&P 500 in recent months; this gap has been narrowing significantly in recent sessions.
- Yesterday, great results from United Health Group helped push the Dow index to new highs, while small-cap companies are in a sense repeating the upward momentum of 2016, when Donald Trump was coming to power in the United States. Also, the prospect of Fed policy easing starting in the fall and a possible corporate tax cut of up to 15% by the Trump administration is improving sentiment among smaller and mid-sized US companies.
- Investors appear to be shifting their bets to companies outside the technology sector that stand to gain in a soft landing scenario. We're talking about so-called 'old economy' companies or small- and mid-cap stocks, which may gain from looser monetary policy and try to compete for share in the markets where they operate. Also, valuations for DJIA and Russell 2000 companies are lower than Nasdaq 100 and S&P 500
- Also, yesterday's retail sales data was seen by investors as 'evidence' of a possible soft landing, rather than a factor that would dissuade the Fed from cutting rates in September. Today, attention shifts to industrial production, whose reading will be announced at 2:15 PM BST. Before the US session, Johnson & Johnson, which has been part of the Dow index for decades, will also report results; the publication could raise US30 volatility.
US30 (D1 interval)
Looking at DJIA (US30) futures trading, we can assume that the index is in the midst of another upward impulse of significant magnitude. Looking at the scale of the previous two such impulses and extrapolating their magnitude, we can assume that the index is roughly in the middle of such an impulse, which would imply a possible reaching of resistance near 43500 points. The increases are supported by a double-hole formation at the level of 38300 points, where the 23.6 Fibonacci abolition of the upward wave from October 2022 also runs. More DJIA companies will report results in the coming days, which could affect the increased volatility of the index.
Source: xStation5
