We asked traders when the Dow will finally hit 20,000
January 24, 2017 • Reprints
Not too long ago, earlier this month, everyone was expecting the Dow to hit 20,000 soon after, but not only has it not happened yet, it even retreated more than a bit before starting to come back up. Still, it is expected that the Dow will reach that level early this year--perhaps, still in the month of January. When? Tomorrow? This week?
So, we asked traders, when will the Dow finally hit 20,000 and what might fuel that jump?
Here's what they had to say...
If the market momentum from the last quarter is maintained, It seems reasonable to expect the Dow above 20,000 by the end of the first quarter.
There are a number of factors that can impact the Dow’s movement in a positive or negative direction. A few of these are:
- Donald Trump Presidency
- China economic growth and the South China Sea expansion
- Heightening tension in the Middle East
- Possible European fragmentation
- North Korea nuclear weapon expansion
- Russia and U.S. relations
It should also be kept in mind that there is a very high expectation for the Trump presidency. It will be interesting to see how long the Trump presidency honeymoon with the markets will continue. The market’s perception that things will improve is very powerful but does have a limit in terms of patience.
A typical behavior of the Dow at a thousand number increments (1,000, 2,000 etc.) is to have a number of false attempts at that level before finally making a commitment to trade through and stay above the thousand number increment.
As a trader, I am not so concerned about when the Dow trades above 20,000, but how it sets up price action trading opportunities.
Dan Gramza is President of Gramza Capital Management Inc. and DMG Advisors, LLC. He provides daily market updates from around the globe on subjects ranging from the Nasdaq and currencies to crude oil and grains at dangramza.com.
Al Brooks @AlBrooksPA
What is fascinating is that the news is making Trump sound like a madman. Yet, despite all of this negative news, only one day in the past 60 has closed below the 20-day EMA. What does this tell us? It tells us that investors think the news reporters are wrong or irrelevant.
This sets up a possible Black Swan rally. A Black Swan event is any low probability move. The news makes a strong rally appear unlikely. Furthermore, it makes the U.S. economy sound like it is in terrible danger. The chart tells us that investors do not care.
Because the market is in a tight trading range, the probability of a bull breakout is about the same as a bear breakout. The news makes a bear breakout sound much more likely. Yet, any time the market dips down to an average price (the moving average), the bulls buy. They don't even wait to buy below the average price. While the market is currently in balance, this price action tells us that there is something very wrong with the bear case. This buying pressure makes a bull breakout more likely than a bear breakout.
While the S&P 500 might dip down a little more over the next few days, the odds are that it will break to a new high within a week or two. If it does, the Dow will break above 20,000.
How far will the rally go? There are several measured move targets between 2350 and 2400. Yet, it is more likely that the bull breakout will not reach those targets. Instead, it will probably fail.
The S&P 500 never tested the breakout above the August trading range high. That is unusual for a breakout late in a bull trend. Therefore the odds are that the Emini will trade down about 100 points (5%) over the next couple of months. However, there is a slightly greater chance of a move above Dow 20,000 first.
Chart: The daily S&P 500 E-mini futures candlestick chart is in a tight trading range. There is a double top with the December 13-high. In addition, there is a double bottom bull flag with the January 12-low.
Al Brooks, M.D., is the author of the Brooks Trading Course and several books on Price action.
Alan Rohrbach @MacroMeister
The Dow Jones Industrial Average (DJIA) will likely be ready to exceed 20,000 by sometime in March. This has become possible after putting in a bit more of a reaction during the early days of the Trump administration.
In addition to Democratic Party recalcitrance on some key initiatives, differing Republican views will also seem to stall the rapid implementation of various efforts. This is where budgetary issues will come up against the social safety net promises of Trump’s election campaign.
Yet after a brief spell where the views on all sides are aired, Trump will likely press his side for action. In the initial phase, they can fudge the budget issue by projecting much stronger growth out into 2018 and beyond.
Once they are united, it will be hard for all Democrats to resist. The significant number of them who are up for reelection in districts that went heavily for Trump and his party in 2016 will not want to appear obstructionist. Assuming that all gets sorted out over the next month-and-a-half, the U.S. equities will get another psychological boost from the pending legislation on tax and regulatory reform.
Whether than maintains is another matter. The overall strength of the U.S. dollar will likely affect U.S. multinationals’ quarterly earnings announcements in April. So the DJIA could weaken back below 20,000 once again after the tax and regulatory progress adrenalin rush wears off.
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