Dow Jones futures look to close out the week positively

Dow Jones futures recovered ground on Thursday as the index rallied from heavy losses brought about by hawkish Fed comments. Of the main indices, the Dow lagged the S&P 500 while both the Dow Jones futures and the Nasdaq futures ended the day +0.25% ahead. However, the move was largely dragged higher by defensive sectors with Consumer Staples (XLP) +1.21% and Energy (XLE) +1.3%. Tech and financial sectors were underperformers on Thursday.

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Dow Jones Futures news: Fed hawks create anxiety

After the Fed minutes and comments from Fed members Brainard and Daly sent yields higher and equities tumbling, Thursday saw some form of recovery take hold. However, we had alarming comments from noted Fed hawk James Bullard, calling for US interest rates to hit 3% before year-end.

Bond markets remain highly nervous with the noted yield curve once again moving back into positive territory. The chart below is of MOVE which is the bond market equivalent of VIX. We can see just how volatile the bond market is as its searches for trend direction. With upcoming rate rises and the quantitative tightening, it is no wonder bond market participants are highly anxious. This will likely spill over into the equity market shortly.

MOVE chart, daily

Dow Jones Futures price prediction: Downtrend stays in place

Dow Jones futures remain in a clearly defined downtrend. We have posted three successive lower highs at 36,832, 35,752, and 35,281. The last level 35,281 is therefore our pivot. Below here, we remain bearish technically in the medium to long-term view. The first target, therefore, is a move to 32,167 which is low from the Ukraine invasion. For now, though we are likely to see more choppy trading. We are in a consolidation zone with a high volume. It is not until we break below 34,500 that volume gets lighter. The MACD is about to crossover but the RSI and MFI are both pretty neutral. 

For Friday, 34,664 is the pivot point. On Thursday, this level produced an overbought signal from both the MFI and RSI. This signal proved correct and the Dow Jones futures lost 100 points for the remainder of the session.

Dow Jones futures chart, 15 minute