Dow Jones: Futures Indicate Higher Open

Jan 20, 2021 06:26 PM ET
Dow Jones: Futures Indicate Higher Open
  • Dow Jones (US 30) Futures have gained 7.31% year on year owing to a positive response to the coronavirus stimulus package signed in 2020.
  • We expect the futures to hit record highs after the new administration unveils the new coronavirus relief bill expected to uplift businesses in the US.
  • There has been an increase in payroll unemployment rates in the non-farm sector due to reduced retail sales.

The Dow 30 Futures edged higher on January 12, 2021, despite the new coronavirus risk, US political pressure, and a rise in unemployment numbers. The index traded at an all-time high of $31,026, mounting hopes for an economic rebound in the US economy. As of March 23, 2020, the index plummeted to an annual low of $18,497. This situation was caused by the President's setting the lockdown wheels in motion for all US States as a disaster preparedness strategy. Over the past year, the index has gained 7.31%. This increase indicates investors' optimism with the stimulus, peaceful transition of political power, and economic recovery into 2021.

Dow Jones Futures chart

Unlike the S&P 500 index that takes in the market capitalization of the top 500 companies, the Dow Jones 30 index uses the share price with corrective factors to determine industrial activity. The point of reference here is that the economy is growing not just for big corporations but also for small and medium-sized US enterprises. The S&P 500 Index dropped 0.6% since January 8, 2021, from the slight underperformance of technological giants in response to riots and attacks on the US Capitol on January 6, 2021.

S&P 500 Level chart 

Investors are wary that tech giants Facebook, Twitter, Amazon, and Apple may face negative responses from regulators and their users over their response to mute the US President. However, the companies are expected to shrug off this threat in the second quarter of 2021.

The payroll employment in the non-farm category decreased into 2021 by 140,000. US labor data also showed that the employment rate was constant at 6.7% in December 2020. The rise in coronavirus cases hampered return-to-work policies as jobs closed to contain the spread of the pandemic.

There was a slight gain witnessed in the fourth quarter of 2020 in professional services, the construction industry (especially housing), and retail trade. These gains helped to offset employment losses in the hospitality/leisure industries and schools offering private education.

 unemployment rate chart

There was an increase in the unemployment rate between March and June 2020. It is at this point that the US 30 Index reached the annual low. 

The DJIA (US 30) Index is expected to react positively to the coronavirus relief package under preparation by the new Biden administration set to take office later in January 2021. With bipartisan support from Congress will not only cover the $2,000 stimulus checks but increased insurance to the unemployed, funds to deliver the COVID-19 vaccine, and other state-supporting measures.    

The relief bill is expected to boost employment numbers by increasing borrowing to small and medium-sized companies. It will also help private service providers to resume business in the wake of the pandemic.

Technical analysis

dow jones industrial average index chart

The 14-RSI indicates a buy position at 64.000, and the stochastic RSI is at 100. Investors are rushing to buy the index before the new administration takes office. The 14-day average true range is 70.7500 showing that the index has little volatility in 2021. The 13-day bulls/bear power indicator shows that the slope has risen to 108.2740, showing that the index crowd is on a bullish run.

On the moving averages, the 20-day SMA shows the index finds support at 30.958 while the EMA (20) is at 30965.8. The 50-day SMA is also a buy at 30907.1 (SMA) and 30939.1 (EMA).

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