Dow Jones Index Defies Weak Data to Stay Up Again. Grasping at Straws?

Summary:
• The Dow Jones Index has risen for two successive sessions for the first time in a month, but the data isn't as convincing.

The Dow Jones Index (INDEXDJX: .DJI) rose for the second session in a row on Monday, defying a soft retail sales data. The Index was up by 0.3% to 41,638 points in the first hour of the new week of trading, amid an underlying anxiety over a potential escalation of trade tariff war between the United States and her biggest trading partners.

US Retail Sales data rose by 0.2% in February, slower than the median projection of 0.6%. However, that was still a relatively strong performance if auto sales figures are excluded. The Core Retail Sales rose by 0.3% month-on-month, up from -0.6% contraction in January and in line with analysts’ median forecasts.

Many investors interpreted the data as signaling that consumption trends are still stable despite the sour trade tariff environment. However, the true impact of the tariffs will likely be more evident in the March data, going by the uptick in trade barriers seen this month.

US tariffs against Canada, Mexico, China and the European Union came into effect in the last three weeks, with the affected nations retaliating with counter tariffs. That is likely to result in higher inflation, potentially resulting in reduced consumer spending.

Furthermore, the Trump administration has lined up a raft of reciprocal tariffs against more nations starting April 2, with the nations likely to retaliate. This scenario sets up the Dow Jones Index for a likely decline in the coming weeks. Nonetheless, Goldman Sachs, UnitedHealth, Nike and IBM stock prices were all up by more than 1% at the time of writing, likely setting the stage for near-term gains by the Dow Jones Index.

Dow Jones Index Prediction

The Dow Jones Index pivot level is at 41,494 points and the momentum signals that the upside action will likely continue in the near-term. The Index will likely encounter the first resistance at 41,799 points level. However, an extended control by the buyers will breach that barrier and potentially test 42,100 points.

Conversely, the Index’s momentum could turn towards the downside if its action breaks below 41,494. That could see the first support come at 41,269 points mark. The upside narrative will be invalid if the action breaks below that level. Furthermore, such momentum could potentially extend the downside to test 41,023 points.