DJIA Record Highs in Sight After BetterThanExpected Q2 Earnings Season

Matt Weller
By :  ,  Head of Market Research

You’d never guess it amidst the latest headlines that the The We Company (WeWork) may be looking to postpone its highly-anticipated IPO or that job creation in the US is slowing, but major US indices are actually within 2% of their all-time highs.

While there are concerns about a potential slowdown in global growth heading into the end of the year, US corporations continue to thrive. According to the earnings mavens at FactSet, 75% of S&P 500 companies beat their Q2 earnings estimates and 57% of companies have reported better-than-anticipated revenues. While corporate earnings overall declined by -0.7% for the quarter, the decline was smaller than expected as the tailwind from 2018’s big tax cut faded.

After pulling back from record highs in late July, the Dow Jones Industrial Average formed a well-defined, 1,000-point sideways range between 25,400 and 26,400 throughout August. The index has now broken out above that area, completing a healthy correction within this year’s uptrend, and appears poised to retest the all-time high near 27,400. Meanwhile, the RSI indicator has formed a clear near-term uptrend of its own after briefly touching “oversold” territory below 30 last month, signaling that the momentum increasingly favors the bulls:

Source: TradingView,

Moving forward, the Dow’s near-term bias remains to the topside as long as the index holds above the previous breakout level at 26,400. Needless to say, a confirmed breakout above 27,400 would be a sign of strong buying pressure and could open the door for a move above 28,000 in time. Only a break back below 26,400 would shift the near-term bullish bias back to neutral from a technical perspective.

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