Dow Jones Index today: is it on the cusp of a bullish breakout?

The Dow Jones Index today, June 24, rose as investors cheered the ceasefire in the Middle East and the dovish statements by two Federal Reserve officials. Its futures jumped by over 300 points, a day after it rose by over 375 points.

Other American index futures have also jumped, with the S&P 500 and Nasdaq 100 rising by over 1%. The VIX Index plunged by over 8%. 

Dow Jones Index today rises after ceasefire

The Dow Jones Index futures rose because of the falling geopolitical risks in the Middle East following the escalation during the weekend when Donald Trump bombed Iran. 

His bombs hit three key targets that housed Iran’s nuclear program, potentially ‘obliterating’ it. Instead of escalation, the bomb attack triggered a ceasefire, with Iran and Israel ending hostilities for now. 

The crisis has not triggered the risks that analysts were expecting. For example, there was fear that Iran would shut the Strait of Hormuz, a crucial place where over 20% of all crude oil passes through.

Iran has also not escalated by bombing and killing US forces in the region. Instead, it launched a limited attack that was well-choreographed to avoid any casualties.

The end of these hostilities is good for the Dow Jones for three main reasons. First, it means that the geopolitical risks of a new war have faded. Historically, the stock market performs well when there are no geopolitical risks.

Second, the end of the crisis means that supply chains will not be disrupted as some analysts were expecting. 

Dovish Federal Reserve statements

The third reason is that the situation has led to lower crude oil prices. Brent, the global benchmark, has plunged from $81 on Monday to $68 today, while the West Texas Intermediate (WTI) benchmark has plunged to $66. 

The implication of this is that the crisis will not lead to a higher inflation rate. This, in turn, means that the Federal Reserve may start its pivot as some officials have predicted. 

In a statement on Friday, Christopher Waller, noted that he supported a 0.25% rate cut in the July meeting. In another statement, Michele Bowman, the bank’s vice chair, said that she would support a cut in July, saying:

The next key catalyst for the Dow Jones Index today is Jerome Powell’s testimony in Congress. Powell will be pressed on the ongoing pressure from Donald Trump, who has intensified his call for rate cuts recently. In  Truth Social post, he said:

The Dow Jones Index does well when the Federal Reserve is cutting interest rates.

Dow Jones Index today analysis

Dow Jones chart | Source: TradingView

The daily chart shows that the Dow Jones Index bottomed at $36,615 in April and then jumped to a high of $42,600. It has formed an inverse head and shoulders pattern, a popular bullish reversal pattern. 

The Dow Jones has formed a bullish flag pattern, comprising of a vertical line and a rectangle pattern. Further, the index has jumped above the 50-day and 200-day moving averages.

Therefore, the index will likely continue doing well in the coming weeks, with the next point to watch being at $43,000 and $44,000.