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Nov 4, 2022

Dow Futures Outlook: Where Is The Dow Headed?

By:Ryan Sullivan

Where is the Dow now?

In our last Dow Futures update, we predicted a test of the 32,000 to 32,600 range if the Dow could push through 31,000 with strength. It did, and now the Dow is sitting just over 32,200, having tested 32,900 on October 31st through November 2nd 

We’ve sold off slightly from 32,900 to get to where we are now. Selling pressure has taken over this week, but we do not yet have a good indication of how strong sellers are in the near term.  The Dow Future’s price is also now sitting at the top of the downward channel that formed and has held since the start of 2022. 

Fig. 1: Two-year price plot for Dow Futures.

Where is the Dow heading?

Now that price is at the top of the channel range, the market must decide if it wants to maintain the channel trend by heading back toward the 30,000 level, or if it wants to break the channel and develop a new trend.  

Based on the price action at the top of the channel, we are experiencing significant selling pressure this week. Sellers are looking at the rally we’ve had since mid-October, and they’ve decided that the 32,000 to 32,900 range is a good range to sell right now. 

If the market continues to sell off from here, we will likely see Dow Futures test the 31,000 price level, which we broke through last week. From mid-June to mid-July and late-September to early-October of 2022, we developed constructive price action below 31,000. It is possible that we retreat below 31,000 again to see if buyers still want to purchase at those prices. 

Although less likely, it is also possible that we continue upward from here. The next level Dow Futures would test, above where we are now, is the 34,000 price level. We tested this level in mid-August and were met with strong selling all the way down to the low of 2022, at 28,635.

What about the rest of 2022?

2022 is quickly coming to a close, the holiday season has already begun. It is common to hear traders refer to a perceived period of “rallying” toward the end of the year, but there is no statistically significant research that lives up to that expectation. It really is anyone's best guess where we finish out 2022. 

We are currently setup for a down move in the near term. How far we fall is up in the air. If we bounce off 31,000 and maintain buying pressure, we could see the Dow spike to 34,000. However, it is more likely that the market will continue testing bottoms and move sideways into the end of the year. 

Recent Fed announcements and major earnings reports haven’t had a huge impact on the market. The market does not seem to be concerned about these pieces of information right now or has them accounted for already.  

Buyers will need positive economic performance if they want to continue higher into the end of the year. Otherwise, it seems that the market will remain between 28,600 and 34,000, testing bottoms.

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