US stock averages all weakened after a mildly positive open as traders presumably took profit with Washington in shutdown mode and little fresh economic data to digest. Still, recent price action suggests Wall Street’s rally could continue as dips have been consistently bought. Earlier, the S&P 500 futures touched new record highs before easing slightly, so we it wouldn’t be entirely shocking now if the Dow Jones and other US indices were to bounce back, given the proximity of record levels from current levels on major US indices. Investors will weigh whether the market can keep rising into earnings season, so profit-taking around key levels should not come as surprise in the coming days. So far, traders have largely ignored talks of a tech bubble. Instead, the focus remains on whether the sector’s heavyweights can deliver results strong enough to justify their lofty valuations. Hopes of two additional Fed rate cuts in 2025 are also keeping spirits high, helping offset worries about a softer labour market. For now, the Dow Jones forecast remains bullish.
Dow Jones forecast: Technical analysis and trade ideas
From a technical point of view, the Dow Jones forecast remains bullish. That’s because the index has been forming higher highs and higher lows. Every major and minor dips have been bought. The fact that we have been hitting new highs and then pulling back only mildly suggests the bulls remain largely in control of price action. Thus, the weakness we have observed so far this week could be another such scenario.
Indeed, the Dow Jones chart was consolidating inside what looked like a short-term bull flag pattern. The index was testing a prior resistance area near 46,400 at the time of writing. With the other major indices breaking to new highs today, I would be expecting the DJIA to potentially bounce back from around here. If it does, then the focus will turn to the resistance trend of the bull flag pattern. And if it can break out of that pattern then this will signal a continuation of the trend, in which case a new all-time high above the most recent peak of 47,057 could be on the cards.
However, if support breaks here around 46,400 decisively, then that could potentially see the index drift lower in the coming days towards 46,000 with 45,700 being the next key support to watch. The long-term support is further low around the 45K area, where the index had topped out back in January, before we finally broke above it in August, after a couple of unsuccessful attempts earlier in the summer.
Upcoming earnings could provide direction
The next meaningful cue for markets will probably come from the new earnings season. Reports begin this week with companies like PepsiCo and Delta Air Lines, before attention shifts to major banks such as Goldman Sachs and Citigroup. These stocks could well have an impact on the Dow Jones forecast. But as for the wider markets, it’s the tech giants due later in the month that will really shape the course of US stock markets. Investors will want confirmation that the AI-driven optimism powering this year’s rally is grounded in genuine performance. Strong results could justify the market’s exuberance; weak ones might expose how dependent recent gains have been on sentiment alone.
The bullish trend still rules
For now, the message is simple: the trend remains in charge. Markets have shrugged off negative headlines since spring, and unless earnings or macro data deliver a real surprise, that resilience looks set to continue. The Dow Jones forecast therefore stays bullish – perhaps not euphorically so, but solid enough to keep traders leaning long. Those already positioned are likely to hold, while newcomers may prefer to wait for a clearer dip before joining the trend.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
