E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Trader Reaction to 34842 Pivot Sets Tone

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Trader Reaction to 34842 Pivot Sets Tone

September E-mini Dow Jones Industrial Average futures are trading steady to lower during the pre-market session as investors square positions ahead of today’s U.S. Non-Farm Payrolls report, due to be released at 12:30 GMT.

The jobs report has been called “highly anticipated” which could mean it’s been overhyped meaning the stock market may show little reaction to it. Instead investors may take the weekend to digest the numbers before making their move next week. The key to trading this report is to avoid getting caught reading the headlines. Let the U.S. Treasury yields be your guide.

At 08:39 GMT, September E-mini Dow Jones Industrial Average futures are trading 34930, down 13 or -0.04%.

Economists expect the economy to have added 845,000 jobs in July, according to estimates from Dow Jones. However the broad range of targets – from 350,000 on the low end to 1.2 million at the top – show the uncertainty that’s currently in the market.

Daily September E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since Monday’s potentially bearish closing price reversal top.

A trade through 35082 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 33623 will change the main trend to down.

The minor trend is down. This confirms the shift in momentum. A trade through 34602 will indicate the selling pressure is getting stronger.

The minor range is 35082 to 34602. The E-mini Dow is currently trading on the strong side of its 50% level at 34842.

The short-term range is 33623 to 35082. Taking out 34602 could trigger an acceleration into its retracement zone at 34353 to 34180.

Daily Swing Chart Technical Forecast

The direction of the September E-mini Dow Jones Industrial Average is likely to be determined by trader reaction to 34842.

Bullish Scenario

A sustained move over 34842 will indicate the presence of buyers. If this move creates enough upside momentum then look for a possible surge into 35082. Taking out this level could trigger an acceleration to the upside.

Story continues

Bearish Scenario

A sustained move under 34842 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into this week’s low at 34602.

Taking out 34602 will indicate the selling pressure is getting stronger with 34353 to 34180 the next likely downside target zone. Since the main trend is up, buyers could come in on a test of this area.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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Index in focus: Was that a fakeout breakout on the DJIA (US30)?

If you’ve been thinking that this year has been a bit too easy for US stock market bulls, you’re definitely onto something.

Astoundingly, the Dow Jones Industrial Average (DJIA, US30) has gone nearly ten months without even a pedestrian 5% pullback! To put this statistic into context, the Dow has historically seen at least a -5% correction every 71 trading days, or roughly every 3.5 months, so on average, we would have expected three such pullbacks since the start of November instead of zero.

So, when the index broke out to fresh record highs above 35,100 earlier this month, index traders thought that we were in for more of the same steady grind higher in the Dow. This week’s price action has thrown a potential spanner in the works for bulls. Despite a record-setting Q2 earnings season in which a staggering 87% of large cap companies beat earnings and revenue estimates, the major indices have rolled over this week and are currently testing support.

Looking at the DJIA specifically, prices have broken back below the 35,100 level to test the 50-day EMA near 34,800 this morning. The critical area to watch moving forward will be the bottom of the 9-month rising channel in the 34,500 zone; a break below that key area could open the door for a long-awaited -5% (or more) pullback, with the next logical levels of support coming in near previous lows at 33,750 or the 200-day EMA all the way down at 32,700:

Source: StoneX, TradingView

Of course, the recent track record and general “buy the dip” zeitgeist points to new highs in the index sooner rather than later, so if the Dow can hold today’s low and rally back above 35,100 next week, we could testing the 36,000 level by September.

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10.2.2

What is the Dow Jones Industrial Average?

Financial Literacy What is the Dow Jones Industrial Average?

When referring to “the stock market,” most news media are talking about a composite index. Often, that index is the Dow Jones Industrial Average (DJIA). Also called “the Dow 30” or simply “the Dow,” it’s the most common indicator of stock market performance. The Dow is an average of 30 actively traded blue chip stocks and is used to analyze the health of the overall market.

While it’s not the only index used to quantify broad market performance, the Dow is among the most trusted. It represents companies at the very heart of the American economy and tells the tale of stock market performance based on the country’s most actively traded companies. Here’s everything you need to know about the DJIA and what it means to investors.

The History of the Dow Jones Industrial Average

Despite its continued evolution, the DJIA is the oldest stock market index used today. The average dates back to 1882, when it was formulated by investment forefathers Charles Dow and Edward Jones. At its inception, it was actually called the Transportation Average. The original index included just 11 companies: nine railroad stocks, a steamship line and a communications company.

In 1896, the average split, forming the Transportation Average and the Dow Jones Industrial Average that we know today. The first iteration of the DJIA included 12 companies:

American Cotton Oil (Now part of Unilever) American Sugar. (Now Domino Foods) American Tobacco (Now Fortune Brands) Chicago Gas (Now part of Integrys Energy) Distilling & Cattle Feeding General Electric Laclede Gas National Lead North American Company Tennessee Coal and Iron U.S. Iron U.S. Rubber

The original DJIA was also much less sophisticated in its weighting. To calculate the average, Charles Dow simply added up each stock price and divided it by 12.

Today, none of the original 12 companies remain in the DJIA—General Electric was the last to fall out in 2018. The index has also grown to 30 companies, picked by the editors of the Wall Street Journal. It’s also no longer a simple average—rather, it’s weighted and averaged using the “Dow divisor,” a complex and dynamic modifier used to properly evaluate the average.

A Closer Look at the DJIA

What does the DJIA look like today? Here’s a quick look at some of the fundamentals behind the current iteration of this everlasting index. Keep in mind that it’s a price-weighted index and not weighted based on the average market cap of included companies.

Companies in the DJIA

The Dow Jones Industrial Average only tracks the 30 largest public companies in the United States. Below is a current breakdown of these companies and when they were added to the DJIA.

3M (NYSE: MMM) 1976 American Express (NYSE: AXP) 1982 Amgen (Nasdaq: AMGN) 2020 Apple Inc. (Nasdaq: AAPL) 1982 Boeing (NYSE: BA) 1987 Caterpillar (NYSE: CAT) 1991 Chevron (NYSE: CVX) 2008 Cisco Systems (Nasdaq: CSCO) 2009 The Coca-Cola Company (NYSE: KO) 1987 Dow Inc. (NYSE: DOW) 2019 Goldman Sachs (NYSE: GS) 2013 The Home Depot (NYSE: HD) 1999 Honeywell (Nasdaq: HON) 2020 IBM (NYSE: IBM) 1979 Intel (Nasdaq: INTC) 1999 Johnson & Johnson (NYSE: JNJ) 1997 JPMorgan Chase (NYSE: JPM) 1991 McDonald’s (NYSE: MCD) 1985 Merck & Co. (NYSE: MRK) 1979 Microsoft (Nasdaq: MSFT) 1999 Nike (NYSE: NKE) 2013 Proctor & Gamble (NYSE: PG) 1932 Salesforce (NYSE: CRM) 2020 The Travelers Companies (NYSE: TRV) 2009 UnitedHealth Group (NYSE: UNH) 2012 Verizon (NYSE: VZ) 2004 Visa (NYSE: V) 2013 Walmart (NYSE: WMT) 1997 Walgreens (Nasdaq: WBA) 2018 Walt Disney Company (NYSE: DIS) 1991

Weight by Sector

The DJIA has a relatively well-distributed allocation among companies. This weighting is subject to change as the DJIA changes and as different sectors perform differently.

Information Technology: 21.8%

Health Care: 16.9%

Industrials: 16.7%

Financials: 16.2%

Consumer Discretionary: 13.4%

Consumer Staples: 7.3%

Communication Services: 4.4%

Energy: 2

Materials: 1.2%

Drawbacks of the DJIA

The reason the Dow Jones Industrial Average has survived more than a century as a stock market indicator is because it’s a great snapshot of market performance. That said, there are criticisms of the Dow that have risen to prominence in recent years.

The first major criticism of the Dow is that it’s no longer a good representation of economic health. This is due in part to the fact that commerce is now global and every company represented in the DJIA has a global presence. Thus, it’s not possible to correlate the national economy with the success of these companies exclusively.

The other major drawback of the DJIA is that it’s price-weighted, not weighted by market cap. Many investors feel that market capitalization is a better method of weighting indices, since is provides a more accurate representation of the company’s impact on the broader performance of the index.

Other Major Indices

As mentioned, the Dow Jones Industrial Average isn’t the only composite index out there. Typically, it’s held in the same regard as other major, reputable indices, including:

While they’re all structured differently, each of these major indices looks at the broad economy through a unique lens. The goal is to provide a snapshot of market performance based on the performance of aggregated equities.

Key Takeaways in Understanding the DJIA

For many, the Dow Jones Industrial Average is the stock market—or at least, the personification of it. It doesn’t represent the economy, but it is a good metric for judging the performance of the United States’ most prominent companies from across each major sector. Investors should use it as a benchmark for evaluating their own portfolio performance. Moreover, it’s a contextualizing lens for the performance of the market as a whole. There’s a reason every financial news media platform in the world refers to the DJIA: because it’s an immutable barometer for the stock market.

To learn more about the Dow Jones and how many of these companies have helped investors build wealth, sign up for the Liberty Through Wealth e-letter below. You will gain access to daily investment tips and trends from some of Wall Street’s leading experts!