The Dow Jones Index has surged and entered a bull market in the past few months. After crashing at $36,615 in April, the blue-chip index has rebounded by over 21% to the current $44,370. It is approaching the all-time high of $45,045.
Fear and Greed Index has surged
One reason for the ongoing Dow Jones Index surge is the ongoing risk-on sentiment among market participants. The closely-watched fear and greed index has plunged to 15, from the year-to-date high of over 50.
Most importantly, the closely-watched Fear and Greed Index has jumped to the extreme greed zone of 75. This happened as key gauges like the stock price strength, stock price breadth, put and call options, and junk bond demand moved to an all-time high.
Further data shows that the safe-haven demand and market momentum indices moved to the greed zone. Only the market volatility index has jumped to the neutral point.
The Dow Jones Index always surges when it is in an uptrend, as it sends a signals that investors have embraced a risk-on sentiment.
One reason for this is that these market participants are no longer concerned about Donald Trump’s tariff threat.
For example, the Dow Jones Index continued rising last week after he sent letters to countries warning them about new tariffs that will kick off in August. He continued his threats during the weekend as he warned about new tariffs on the European Union and Mexico.
Corporate earnings ahead
The next important catalyst for the Dow Jones Index is the upcoming earnings season, which kicks off officially on Tuesday, when the biggest U.S. banks and companies will publish their earnings.
Some of the most notable companies that will publish their earnings this week are JPMorgan, Goldman Sachs, Citigroup, Wells Fargo, BlackRock, and Netflix.
Most analysts expect these results to show that earnings dropped sharply in the second quarter because of tariffs. Precisely, the expectation is that the average earnings dropped to the lowest level since Q4’23.
On the positive side, this decline in earnings could mark a bottom, which will lead to sustained growth in the next few months.
The Dow Jones Index will also react to the upcoming US Consumer Price Index (CPI) data. Economists expect the data to show that US inflation rose for the second consecutive months because of tariffs.
Dow Jones Index analysis
The daily chart shows that the Dow Jones Index has jumped in the past few months, moving from the year-to-date low of $36,615 in April to $44,370 today.
The index has already formed a golden cross as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. Most importantly, it has formed an inverse head-and-shoulders pattern, a popular bullish reversal sign.
The Average Directional Index (ADX) and the MACD indicators have all jumped in the past few months. Therefore, the most likely scenario is where it keeps rising this week.
For this to happen, it will need to first pass the all-time high at $45,045. This price coincides with the neckline of the inverse head-and-shoulders pattern.
By measuring the distance from the head and the neckline, we see that it is about $8,385. Adding this figure to the neckline shows that the index will ultimately jump to over $53,000.
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