Dow Jones futures eyeing bullish breakout?

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David Scutt 125
By :  ,  Market Analyst
  • Dow Jones futures surge nearly 3% in a little over a week
  • Coiling up in potential bull pennant, traders should be alert for a bullish breakout
  • Signs of renewed disinflation in the US, resilient economic growth, may allow the Fed to engineer a soft landing
  • Such an outcome should benefit cyclical indices like the Dow

Sitting in a bullish pennant pattern with RSI and MACD pointing to building upside momentum, it looks like we may soon see a test of topside resistance in Dow Jones futures, pointing to the potential for a bullish break or bearish reversal that may see the price coil up even further.

Whatever outcome eventuates, we can build a trade setup around it using topside resistance.

dow june 25 2024

Should futures break higher, consider buying the break with a tight stop below the former resistance level. The preference would be to see the price close above the level before entering the trade as we saw a large reversal the last time the resistance level was tested.

The initial trade target would be 40213, the high set that day, with the record high of 40358 the next level after that. If the trade were to work in your favour, consider raising your stop to entry level, or using a trailing stop if we see the record high give way.

But should futures test hesitance without being able to close above, consider selling the failure with a tight stop above the resistance level for protection. Potential trade targets include 39658 and 39193.

From a fundamental perspective, renewed signs of disinflation in the US economy adds to the risk we may see more than one rate cut delivered by the Fed this year.

With activity holding up, at least according to the Atlanta Fed GDPNow estimate, the combination of rate cuts and resilient economic growth is the definition of a textbook soft landing, an outcome that should benefit more cyclical indices such as the Dow.

-- Written by David Scutt

Follow David on Twitter @scutty


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