DJIA: Bulls still in charge despite Delta-driven 1,000-point plunge and recovery

Traders are still trying to wrap their heads around the popular index’s 1,000-point collapse on Monday and subsequent 1,000-point recovery over the last day and a half...

Quiet session 1

As of writing at the midpoint of the trading week, the widely-followed Dow Jones Industrial Average (Wall Street) is trading near 34,750, within about 50 points of where it closed Friday’s trading session.

So clearly, it’s been a quiet week right?

Bad jokes aside, traders are still trying to wrap their heads around the popular index’s 1,000-point collapse on Monday and subsequent 1,000-point recovery over the last day and a half. The move was ostensibly driven by fears over the spread of the delta COVID variant, and while its impact on developing market economies with slow vaccine rollouts will undoubtedly be severe, the (early) low hospitalization rates among double-vaccinated populations suggests that it’s impact may be limited in more developed markets. In any event, traders are seemingly reassured by the perception that fiscal and monetary policymakers remain on standby to backstop any economic slowdown as needed.

From a technical perspective, the DJIA remains in a longer-term uptrend, with price rising above the upward-trending 50-, 100-, and 200-day EMAs. More recently, the index has carved out a sideways range over the last three months between support in the 33,600 area and resistance up at 35,000:

Source: StoneX, TradingView

Combining the longer-term uptrend with the near-term consolidation, a bullish breakout into record territory is still the more likely scenario; astute traders will be watching for a breakout above about 65 in the 14-day RSI indicator to lead and/or confirm any bullish breakout in the index itself for a potential rally to 36,000 or higher heading into late summer. On the other hand, a confirmed bearish breakdown through the 100-day EMA and range low near 33,600 would point to a deeper retracement toward the mid-32,000s next.

As a reminder, six of the seven largest companies on the planet (Apple, Microsoft, Amazon, Google/Alphabet, Facebook, and Tesla Motors) all report Q2 earnings next week, so that will be the most important fundamental storyline to monitor in the immediate future – see my colleague Fiona Cincotta’s full “Big Tech” earnings preview report for more on these names!

How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.



Build your confidence risk free

More from Indices

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.