27 Aug

US30 index hits record intraday high!

August 27, 2024

By ForexTime

  • US30 posted highest-ever intraday price on Monday, August 26th
  • US stock markets cheer incoming Fed rate cuts
  • US30/Dow index could climb another 7% by August 2025
  • Technicals: US30 yet to reach “overbought” conditions
  • This week’s key events: Nvidia earnings, US jobless claims

 

The US30 stock index has just hit a new record high.

Yesterday (Monday, August 26th), this US stock index printed a price of 41468.5, surpassing its July 18th intraday peak of 41,448.5 by exactly 20 index points.

If the US30 index can register a closing price on the daily timeframe candlesticks above 41,313.7 from July 17th – then would also set a highest-ever closing price.

NOTE: The closing price is a widely used measure to often determine whether an asset has reached a record high.

Overall, US stock indexes have staged a stunning rebound from its sheer drop since mid-July through early August!

Dow hits new all-time intraday high

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What is the US30 stock index?

The US30 stock index tracks the benchmark Dow Jones Industrial Average a.k.a. the “Dow”.

The Dow index is like a basket of stocks, with 30 different companies representing major industries across the US economy.

Among those 30 companies are popular names such as Apple, Microsoft, McDonald’s, Coca Cola, Visa, JPMorgan, Goldman Sachs, NIKE, Boeing, Walt Disney, and many more.

In short, if most of these 30 stocks go up, then the price of the basket/index goes up too, and vice versa.

 

 

Why is the US30 stock index rising?

Generally, stocks (and other riskier assets) tend to move higher at the thought of interest rates coming down.

This is because, lowered interest rates are intended to help support economic activity e.g. when a household has to pay less interest on its debt, it has more money to spend at McDonald’s, NIKE, and even Disney.

With that in mind, Fed Chair Jerome Powell declared at his Jackson Hole speech last Friday (August 23rd) that …

“The time has come for policy to adjust”.

That means the Fed is ready to start cutting interest rates at its next FOMC policy meeting on September 17-18th.

Hence, this stock index (along with its members’ share prices) has been rising, not waiting around till the actual rate cuts materialise.

After all, markets are forward looking in nature: today’s prices reflect tomorrow’s hopes.

 

 

What could move this index this week?

Note that the 30 stocks within the Dow’s “basket” are more sensitive to the economy.

That means the Dow tends to rise as its 30 member stocks earn more revenue and profits when the economy is doing well, and vice versa.

Such sensitivity to the economic cycle is in contrast to the big tech/growth companies that can still earn profits from continuous AI spending or even during recession during the global pandemic.

With all that in mind, for the rest of this week, the US30 is set to react to major US economic data announcements:

  • Tuesday, August 27th: @ 2:00PM GMT: US August consumer confidence and business conditions
  • Wednesday, August 28th: Nvidia earnings (after US markets close)
  • Thursday, August 29th @ 12:30PM GMT: US weekly initial jobless claims, 2Q GDP (second estimate)
  • Friday, August 30th @ 12:30PM GMT: US July PCE data (the Fed’s preferred inflation measure), personal income and spending

From the list above, arguably the initial jobless claims and Nvidia’s earnings should hold greater influence over the UXS30 index.

After all, Nvidia has been widely dubbed as the world’s most-important stock.

Also, the state of the US jobs market can truly shape market expectations for the size of the Fed’s September rate cut (25-basis points or 50-basis points cut?).

 

 

POTENTIAL SCENARIOS:

  • BULLISH: The US30 index should set a new record high if Nvidia can buffer hopes that its AI-fuelled future earnings are still growing, coupled with robust US economic data.

    Judging by another technical indicator, the 14-day relative strength index (RSI), the US30 has yet to officially reach “overbought” conditions (when the RSI touches 70 or higher).

This suggests that the US30 index still has room to climb even further into never-seen-before territory.

 

  • BEARISH: The US30 index could see an immediate retreat to around the 40,770 – 40,780 region for immediate support, or perhaps even its 21-day simple moving average (SMA).

    Such swift declines could be triggered if Nvidia delivers a massively disappointing earnings outlook, coupled with US economic data that stokes recession fears.

 

 

Over the longer term, Wall Street forecasts that the Dow can climb another 7% over the next 12 month, crossing above the 44k mark by August 2025.

However, the US30 index is bound to deliver plenty of shorter-term trading opportunities, as it seeks its next move from the current record highs.

Forex-Time-LogoArticle by ForexTime

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