The Dow Jones Industrial Average (DJIA) gained ground on Monday, extending a near-term rebound and on pace to see one of its best single-day performances in June. Treasuries are holding flat and investor sentiment, while mixed, is holding broadly in place as rate cut hopes continue to hold out for a September rate trim.
Key US data looms ahead later in the week, with an update to annualized US Gross Domestic Product (GDP) for the first quarter on Thursday and a new print of US Personal Consumption Expenditure (PCE) Price Index inflation slated for Friday. Investors will broadly be looking for cooling inflation metrics and slightly soft economic figures to drive the Federal Reserve (Fed) towards a rate cut in September, but both too-good and too-bad figures will spark a dogpile into safe havens.
The Dow Jones is broadly higher on Monday, with over two-thirds of the index’s securities seeing green to kick off the new trading week. Salesforce Inc. (CRM) still struggled on the day, backsliding -1.75% and falling to $240.00 per share as the digital management software company struggles to capitalize on the broad-market AI splurge.
Familiar crowd favorites Chevron Corp. (CVX), Amgen Inc. (AMGN), and International Business Machines Corp. (IBM) are all up over 2% on the day as investor appetite bids up the big name houses. Chevron rose above $158.00 per share, with Amgen climbing to $314.81 and IBM testing $176.00 per share.
The Dow Jones tested a fresh five-week high on Monday, clipping into 39,581.81 before cooling off in the back half of the day’s US market session. The index has climbed 4% after hitting a near-term bottom at the 38,000.00 handle.
There is still plenty of ground to cover before bulls can pierce into new all-time highs above the 40,000.00 major handle, but shorts will have an equally hard time pushing back to major long-term technical support at the 200-day Exponential Moving Average (EMA) at 37,462.29.
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on 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 corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary 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 both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable 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 enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
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