Dow Jones forecast: Stocks struggle amid election uncertainty, mixed data and oil selling

While the major US indices such as the S&P and Nasdaq traded higher during the European hours, the Dow was struggling with weaker oil prices hitting energy names. The hand-over from Europe wasn’t too inspiring either following a weaker performance there with major indices falling. Meanwhile, US traders sifted through a mixed bag of economic data alongside a wave of corporate earnings reports. But with the odds of a Trump victory increasing, this seems to have helped US markets somewhat as he is viewed as a more financial market friendly candidate. But it is a close race, and we could yet see some volatility creep into the market as we head deeper into the week. The Dow Jones forecast is subject to great uncertainty.

Mixed US data puts upcoming economic reports in focus

Ahead of next week’s US election and Federal Reserve’s decision, traders are watching this week’s key US data. We had some mixed news on that front as job openings dipped to their lowest level since early 2021, while consumer confidence rose to its highest mark since the start of the year. With one offsetting the other, this puts the focus on the upcoming GDP, nonfarm payrolls and ISM services PMI reports later in the week.

Mixed company news ahead of Alphabet results

Stock market investors were also keeping an eye on earnings, and prepared for results from Alphabet after the close, with expectations that the company’s long-term growth trends remain firmly on track. Dow components McDonalds fell while Boeing rose. The former saw third-quarter sales fall short of Wall Street expectations, impacted by weaker performance in key international markets, including France, China, the UK, and the Middle East. The latter bolstered its finances with a hefty $21.1 billion share sale—one of the largest ever for a public company—aimed at stabilising its balance sheet and warding off a potential credit rating downgrade to junk status.

Crude oil extends losses, hurting the Dow Jones forecast

Also pressuring the Dow was continued falls in oil prices after Brent dropped over 5% on Monday after Israel’s retaliatory strike on Iran over the weekend avoided crucial oil and nuclear infrastructure, easing concerns about potential supply disruptions. The measured response was more restrained than markets anticipated, boosting optimism that the conflict may not intensify.

On the demand side, weak economic activity in China continues to dampen sentiment, with recent data revealing a decline in industrial profits despite government stimulus efforts. China’s PMI data is expected later this week. Investors are also watching the OPEC+ for any potential output adjustments in December, along with the implications of the upcoming US elections.

Technical Dow Jones forecast: Key levels and factors to watch

Source: TradingView.com

The technical Dow Jones forecast has turned a tad bearish following last week’s drop. The last weekly drop of a similar magnitude took place in early September. That time, though, there was no immediate election risk, and so the index quickly bounced back and went on to hit new records in the pursuing weeks. This time, it could be different. Still, we will need to see a lower low to confirm the bearish reversal beneath the last short-term low at 41,800.

If seen, we could see a sizeable drop with the next obvious support not seen until around 40,900 to 41,000 area. The longer-term trend line and 200-day average converge around the psychologically important area of 40,000.

Standing in the way of these potential support levels is another one close to where the market finished on Friday, around 42,000. The bulls will want to hold their ground here now.

In terms of resistance levels to watch, the most important one in my view lies at 42,400 to 42,500. This area is now pivotal insofar as the short-term technical outlook is concerned.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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