Dow Jones futures have started the week in the green as traders wager that last week’s post-holiday collapse offers a dip-buying opportunity. E-mini futures have reclaimed 35k in early Asian trade and currently doing business at 35,086 (+228).
Global stocks were hammered Friday on concerns the emerging Omicron Covid strain will knock the world’s growth trajectory off-course. The Dow suffered its worst session in over a year, losing 1,000 points intraday, before paring the one-day loss to -891. As a result, the index broke down below the 50, and 100-day moving averages before bouncing from trend line support.
Opinions are mixed as to whether the new Covid strain presents a material threat to global GDP. Whilst the WHO has expressed ‘concern’, the United Nations said it’s ‘not clear’ if it’s more severe than the delta variant. Subsequently, buyers are cautiously returning to risk assets hoping that Friday’s liquidity-driven sell-off was overdone.
The daily chart shows Dow Jones futures are holding their uptrend. Furthermore, the price is above the significant 200-Day Moving Average at 34,243 and approaching the 50, and 100-Day indicators. And if the Dow climbs above the 100-DMA at 35,061 and the 50 at 35,163, it should encourage further buying.
In my opinion, the market is still in an uptrend despite Friday’s rout. On that basis, I see no real cause of concern just yet. Of course, that may change if nations introduce measures to combat the spread of Omnicron. However, until that happens, the 200-DMA should dominate. Therefore, as long as the Dow Jones stays above 34,243, it should continue to trade well, potentially targeting 35,500 (August highs).
On that basis, I am cautiously bullish. However, a close below the 200-DMA invalidates the optimistic view.
E-Mini Dow Jones Chart (Daily)
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