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Dow Jones tests new all-time high, struggles to reach 40,000 level

  • The Dow Jones briefly hit a new all-time high, but remains cautious.
  • The Federal Reserve's speech dominates the headlines on a quiet Monday, when risk appetite fluctuates.
  • Markets continue to bet on a rate cut in September, but the odds are decreasing.

The Dow Jones Industrial Average (DJIA) hit a new all-time high on Monday, but prices are moving toward the center, near the 40,000 level. Federal Reserve (Fed) officials are coming out in force to kick off the new week, with a number of policymakers giving cautious comments on Monday. New statements from Fed officials are expected on Tuesday.

Last week, inflation data came in slightly below expectations, raising market hopes that the Fed would cut interest rates. Even though last week's inflation data was better than expected, price growth remains well above the Fed's annualized target of 2%. Top Fed members remain concerned that progress on inflation may be stalling.

The latest Minutes from the Fed's Federal Open Market Committee (FOMC) meeting will be released this week, followed by US Purchasing Managers' Index (PMI) figures. Sales of new and used homes, as well as durable goods, will be published at the end of the week.

The CME's FedWatch tool shows that rates markets continue to price in at least 25 basis points of rate cuts from the Fed's September rate meeting, but the odds are decreasing. With the current cut, rate traders are pricing the odds of a quarter-point cut in September at around 63%.

Dow Jones News

More than half of the stocks that make up the Dow Jones are in the red on Monday, with JP Morgan Chase & Co. (JPM) leading the losers, retreating -2.7% and falling below $200 per month. action. JPM pulls back after recently reaching a new 52-week high near $205.00.

On the upside, Caterpillar Inc. (CAD) rose 1.7% to $362.40 per share. Caterpillar was closely followed by Boeing Co. (BA), which rose 1.45% to $362.50 per share.

Dow Jones Technical Outlook

On Monday, the Dow Jones reached a new all-time high of 40,070.82 points, before cautious investors pulled the index back as low as 39,900 points. Despite the softening of bids at the start of the new trading week, the DJIA remains firmly planted in bullish territory.

The Dow Jones is still up almost 6% in 2024, and is trading well above the 200-day exponential moving average (EMA) at 37,090.37 points.

Dow Jones Five Minute Chart

Dow Jones Daily Chart

Frequently Asked Questions About the Dow Jones

What is the Dow Jones?

The Dow Jones Industrial Average, one of the world's oldest stock indices, is made up of the 30 most traded securities in the United States. The index is weighted by price rather than capitalization. It is calculated by adding the prices of the securities that comprise it and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, also founder of the Wall Street Journal. In recent years it has been criticized for not being sufficiently representative, since it only follows 30 companies, unlike broader indices such as the S& P 500.

What factors influence the Dow Jones index?

There are many factors that drive the Dow Jones Industrial Average (DJIA). The main one is the aggregate performance of its component companies, revealed in quarterly corporate earnings reports. US and global macroeconomic data also contribute, influencing investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA, as it affects the cost of credit, on which many companies largely depend. Therefore, inflation can be a determining factor, as well as other parameters that influence the decisions of the Federal Reserve.

What is the Dow theory?

The Dow Theory is a method for identifying the main trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where they are both moving in the same direction. Volume is a confirmation criterion. The theory uses elements of maximum and minimum analysis. The Dow theory proposes three phases of the trend: accumulation, when the smart money begins to buy or sell; public participation, when the general public joins the trend; and distribution, when the smart money abandons the trend.

How can I trade with the DJIA?

There are several ways to trade the DJIA. One of them is to use ETFs that allow investors to trade the DJIA as a single security, instead of having to buy shares of the 30 companies that comprise it. A prominent example is the SPDR Dow Jones Industrial Average ETF (DIA). Futures contracts on the DJIA allow traders to speculate on the future value of the index, and options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds allow investors to purchase a portion of a diversified portfolio of DJIA securities, providing exposure to the global index.

Source: Fx Street

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