Dow surge highlights forward-looking market sentiment
With stocks surging higher despite shockingly poor data last week, markets are clearly looking to the future for drivers. Could this mean a more protracted move higher for the Dow?
Global stocks start the week positively
Global stocks have started the week in optimistic fashion, with US stocks surging towards limit-up territory after the first weekend gap higher since this sell-off began.
Interestingly that has come from a crucial period of data which has highlighted just how detrimental the coronavirus has been for the economy.
With a record breaking 6.6 million claimants in a week, coupled with an incredible -701k payroll figure, there are plenty of signals to highlight the severity of this burgeoning crisis.
Bright outlook in face of shocking data
However, despite shocking data across the board, we have still seen sharp gains come into play off elements such as rising oil prices and lessening daily mortality numbers across a number of European nations.
To some extent this feels like a signal that markets will remain focused on the future rather than the past. Remember, that many of those figures seen last week were vastly inferior to market expectations (NFP: -701k vs -100k).
Therefore, if markets can easily enough brush aside a 601k miss on the payrolls figure to subsequently end up sharply higher, we can safely assume that pessimistic data may not be enough to spark further market declines.
What drivers should traders look out for?
With that in mind, the Dow Jones and other markets will be looking forward to the next market drivers. The current focus is on a possible resurgence in oil prices, alongside a potential peak for UK and US coronavirus mortality rates.
That could provide us with further upside and stability in the near term, yet we could soon enough start to see the role of earnings come into play. While Q1 earnings are backwards looking, they also provide clarity over exactly how hard companies are being hit.
Perhaps most crucially, traders will be looking for forward looking outlooks and statistics that show us exactly how much the measures taken by central banks and governments have mitigated the negative effects of this crisis.
Dow Jones technical analysis
For the near term, the Dow has a clear hurdle to overcome, with price rising into a confluence of trendline and Fibonacci (76.4%) resistance.
A break through the 22,538 level will ultimately be needed to negate the recent consolidation, with a distinct possibility of another turn lower from this resistance zone if it is not broken.
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