Dow Jones index forms bullish patterns as hedge funds turn sour

July 11, 2023 12:30 AM PDT | By Invezz

Dow Jones index forms bullish patterns as hedge funds turn sour — Image source: Invezz

Technology companies continue

Hedge funds have slashed their bets on US equities after the strong performance in the first half of the year. Data compiled by Goldman Sachs shows that hedge funds have their lowest weighting to US stocks.

This change of tune is mostly because of concerns about valuations. A company like Nvidia has now attained a market cap of over $1 trillion. This valuation is significantly stretched since the company had over $26.9 billion in revenue in 2022. Apple’s market cap has moved to about $3 trillion while Microsoft’s valuation is nearing that benchmark.

There are also concerns about revenue and earnings growth. Analysts at Morgan Stanley believe that earnings growth will be slower than expected. In a statement, Mike Wilson said that risks for a major market downturn have never been higher.

Watch here: https://www.youtube.com/embed/rsOOiwfr-5Q?feature=oembed

Technology companies are among the best performers in the Dow Jones index. Salesforce, Apple, Microsoft, and Intel stock prices have jumped by more than 23% this year. They have been the best-performing stocks in the index.

Other top performers in the Dow are American Express, Visa, Boeing, McDonalds, and Walmart have also done well. The biggest laggards in the index were companies like Walgreens, 3M, Amgen, Chevron, UnitedHealth, and Verizon have been the worst performers.

Looking ahead, the next important catalyst for Dow Jones will be the upcoming corporate earnings. As I wrote in this article, most analysts expect that big American banks will publish mixed results, provisions for bad loans rising.

Dow Jones index forecast

The daily chart shows that the Dow Jones index has been in a bullish trend in the past few months. It has moved slightly above the 25-day and 50-day exchange moving averages (EMA).

The stock is slightly below the important resistance level at $34,471, the highest level since December last year. It has also formed an ascending triangle pattern while the Relative Strength Index (RSI) has moved slightly below the neutral point. It has also formed an inverted head and shoulders pattern.

Therefore, there is a likelihood that the index will have a bullish breakout in the coming weeks. This view will be confirmed if the price moves above $34,471. If this happens, the next level to watch will be at $35,000.

The post Dow Jones index forms bullish patterns as hedge funds turn sour appeared first on Invezz.

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