Dow futures point to a strong open on Wall Street on Tuesday, but analysts are increasingly sounding the alarm.
Appearing on CNBC this morning, Craig Johnson, Chief Market Technician at Piper Jaffray & Co, warned of a “meaningful correction” in the US stock market.
“From my perspective, I think we’ve got to be a little bit more cautious in here with this waning momentum at this point in time. I think this market is probably going to set up for some kind of correction.”
Dow futures jump 100 points
Dow Jones Industrial Average (DJIA) futures rose in early morning trading Tuesday. At 7.18 am ET, Dow futures traded at 27,275, 100 points higher for a 0.36 percent gain.
S&P 500 futures also pointed to a strong open for the US stock market, rising 9 points to 2,998 (a 0.3 percent gain). Nasdaq Composite futures posted the biggest percentage gain in early trading, up 0.38 percent at 7,955.
Stock market correction on the horizon
Johnson pointed to a number of technical indicators to predict a “meaningful correction” in the S&P 500 chart. Although the market hovers around record levels, he’s not seeing enough new highs to give the bulls control. A correction in the S&P 500 would almost certainly be mirrored in the Dow Jones Industrial Average.
“We’re not seeing as many new highs as we’re seeing new lows in the market. This week, we’re seeing a MACD [Moving Average Convergence Divergence] sell signal and we’re seeing some waning momentum in the market between MACD and RSI.”
Johnson’s technicals are compounded by a number of poor fundamentals in the market too. Corporate earnings are relatively weak and trade war fears continue to dampen investor sentiment.
Dow Jones bull case?
While Johnson is bearish in the near-term, his anticipated correction may prove to be nothing more than a healthy dip. As CCN reported, Fidelity’s director of global macro, Jurrien Timmer thinks the stock market could rage higher for another eight years.
“To me, the stock market continues to look, feel and act like a secular bull market, a bullish super-cycle with corrections that don’t reverse the upward march. If so, we could see additional strong gains for another 5 to 8 years….”
Last modified: March 4, 2021 2:38 PM