DJIA : Forecast

(Mon, 19 Oct 2020). A string of key Chinese data may set the tone for Asia-Pacific equities, as well as risk-linked Australian and New Zealand Dollars. Economists foresee Chinese economic growth accelerated to 5.2% YoY in Q3 from 3.2% in Q2. September’s industrial production and retail sales data will also be closely watched for clues into China’s supply- and demand-side recovery from the pandemic. Retail sales are forecasted to expand at 1.8% YoY, while industrial production rises 5.8% YoY. For both, that would be their fastest pace in 9 months.

Dow Jones futures climbed 0.36% during early Asia trading hours, in anticipation of better Chinese data and speeches from Fed Chair Powell and ECB President Lagarde later today. US corporate earnings continued to show strong momentum, which may shelter stock markets against election and stimulus risks.

The US corporate earnings have fared well so far. More than 80% of S&P 500 companies, which have released their earnings so far, have beaten analysts’ forecasts. On Friday, five out of seven companies released better-than-expected earnings. International Business Machine (IBM) will unfold results on Monday, followed by Procter & Gamble and Netflix on Tuesday.

Sector-wise, only 3 out of 9 Dow Jones sectors closed in the green, with only one third of the index’s constituents ending higher. Industrials (+1.29%), healthcare (+0.21%) and consumer staples (+0.01%) were among the better performers, whereas energy (-0.84%) and financials (-0.23%) were lagging.

Technically, the Dow appeared to have entered into a consolidative period after coming off a six-week high. It has tested an immediate support level at 28,390 – the 23.6% Fibonacci retracement (chart below) and has since rebounded. Breaking below this support may open room for more downside potential towards 28,040 – the 38.2% Fibonacci retracement.

The overall trend appears bullish-biased, as upward-sloped 20- and 50-Day Simple Moving Average (SMA) lines suggest. The MACD indicator, however, is likely to form a ‘bearish cross’ over, suggesting that upward momentum might be fading.








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