New short-term target for Dow

Price at time of writing – 16,245.

The Dow Jones closed last night just two points higher than at the time of my last update on 18 March. 

However, this apparent stability disguises some increased volatility, and it is worth noting the index also retested its December high last week. Although the Dow opened on Friday marginally above its key resistance at 16,558, there was no momentum and the index quickly sold off. As a result, my short recommendation remains unchanged.

What has encouraged me of late is the resurgence in US merger and acquisition (M&A) activity. Although a revival in M&A has long been expected, it took a disappointingly long time to arrive. Rather than merely hoarding cash, company boardrooms now appear to be gaining in confidence to grow via acquisition, and take advantage of cheap readily-available credit. Better late than never, this fresh confidence could well become the fundamental justification if the Dow were to break towards a new and higher trading band.

Despite a fierce two-day pullback in US share markets, the Dow still trades above my former target of 16,175. Whilst this remains the case, some benefit of doubt must remain with the five-year uptrend. In the absence of a clean break above 16,558, the sideways pattern over the first quarter is intact.

Recommendation: stay short. I am raising the short-term target to 15,606. Stop-losses can remain unchanged and triggered on momentum above 16,558. 

Dow Jones chart

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.