Dow Jones Price Outlook:
- The Fed released minutes to their July committee meeting on Wednesday, sparking brief volatility
- With the event risk in the rearview, price action could see an uptick, but seasonal conditions will remain a headwind in that regard
- Dow Jones, S&P 500 & FTSE 100 Forecasts for the Week Ahead
Dow Jones Forecast Largely Unchanged After Fed Minutes Despite Losses
The Dow Jones dipped slightly following the release of FOMC meeting minutes Wednesday afternoon. In the transcript it was revealed Fed officials have pondered yield curve control as a possible policy option. While gold prices dropped and the US Dollar spiked, equity markets suffered only minor losses. To be sure, the underlying tailwind behind stocks remains intact after the Fed announced large scale asset purchases are officially part of the conventional monetary policy toolkit.
Dow Jones Price Chart: Daily Time Frame (January 2020 – August 2020)
Therefore, the fundamentals beneath the current rally in stocks appear largely unchanged and the losses, at present, have not materially altered the technical picture. Together with a distinct lack of volatility due to seasonality, the Dow Jones looks well positioned to continue its current journey higher.
That said, timid price action – reflected by the shrinking average true range - will work to keep a lid on price action, so I am hesitant to suggest a sudden charge higher in favor of a continuation of the norm.
| Change in | Longs | Shorts | OI |
| Daily | -18% | 18% | 7% |
| Weekly | -19% | 14% | 4% |
Further still, IG Client Sentiment data reveals retail positioning is heavily skewed to the downside, which may be another indication that the Dow Jones will continue to rise despite initial losses and waning price activity. In the meantime, follow @PeterHanksFX on Twitter for further updates and analysis.
--Written by Peter Hanks, Strategist for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
