This week the Dow Jones Index reached a new record, continuing a pattern that began in April after it plummeted to an all-time low of 36,620. The Dow Jones Index has now increased by more than 22%. This means that the market is bullish. The Dow Jones Index still has a lot of upside.
Dow Jones Index is a strong performer
Technically, the Dow Jones is a strong stock. The 50-day and the 200-day moving averags formed the bullish golden-cross pattern.
The stock formed an inverse pattern of head and shoulders. The pattern consists of the head which is in this instance at 36,627. Left shoulder at 41,870 and right at 43 350. Different levels of shoulders are common.
In the coming months, the Dow Jones Index is likely to continue its upward trend. The next level of interest will be $50,000. If it falls below $43,350, this forecast is invalid.
Source: TradingView
Federal Reserve interest rate cuts
Another reason that Dow Jones Index will have more upside in the future is because the Federal Reserve will begin cutting interest rates next year. Although odds on Polymarket have decreased in recent months, they remain at or above 70%.
CME Fed Futures has odds of 72%. The odds have been slightly reduced after strong US inflation data was released. Reports showed the consumer price index core (CPI), which is a measure of prices for consumers, jumped up to 3,1% in July. The producer price index (PPI), on the other hand, jumped to 3.6%.
It is possible that the US is heading towards a situation called stagflation. This is marked by high inflation rates and slow growth. Recent reports showed the unemployment rate in the US rose to 4,2%, as hiring stagnated.
The Fed is likely to focus on lowering interest rates in order to reduce unemployment. In 2026, after Donald Trump takes over as Fed chair from Jerome Powell, there will be more cuts.
The Dow Jones, and other indices of stock prices have historically done well when rates are being cut by the Fed.
Corporate earnings are strong
Another reason the Dow Jones Index could continue to rise this year is because American companies published solid financial results in spite of the tariff issues.
FactSet data shows the combined earnings growth for the second quarter at 11.8%. This is much higher than median estimates of 4.8%. This was the third quarter in a row that double-digit growth had been recorded, which is a good sign. The most important thing is that more firms provided optimistic forecasts.
Tariffs have a price.
Donald Trump’s deals with major countries such as China, Japan and South Korea will benefit the Dow Jones Index. In most of these agreements, the US has left tariffs at or above 10%. This is bad for many companies.
The Dow Jones, however, will gain from the security that comes with these agreements. The Fear and Greed Index is still in the Greed zone because of this.
Other reasons exist for the Dow Jones to continue its upward trend this year. It will also benefit from the continued weakening of the US dollar, and from bullish predictions by top analysts such as those at Citigroup and Morgan Stanley.
This article The Bullish Case for Dow Jones Index first appeared on The ICD
