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Dow Jones Index Market Analysis June 8 2017 - The UK Election 2017

The whole world is watching to see how the UK Election will turn out. Will Theresa May still be residing in No.10 Downing Street by next week? Or will the world wake up to a Jeremy Corbyn premiership? The outcome of the UK election will matter a lot to the stock market in UK especially when Labor has different ideas on how to run the economy. Labor's Re-nationalization of utility companies will send utility stocks lower and who knows what their agenda will do to bank stocks?

The UK Election 2017

No matter what the outcome, the Dow Jones will still be healthy.

Whether a Theresa May premiership or a Jeremy Corbyn leadership emerges, the UK will still be committed to leaving the Eurozone. Corbyn has said that he will not seek another Brexit vote. So, in the event that Corbyn wins, I believe UK will still exit the European Union. What leaves to be determined are the terms and the extend of the impact a Corbyn negotiation will affect UK and its citizens.

There are ample layers of support in the Dow Jones Industrial Average and the S&P 500 index. So in the event of a surprise outcome, I believe the markets will still be able to find support at these areas and prevent a big crash.

Since March 2017, the FTSE 100 has risen and not fallen. Though the rise is not as much as I would like to see, nevertheless, I think the stock market is hinting that Theresa May will still return to No.10 Downing Street but with not as great a majority as the conservatives would like it to be. For those who are new to the predictive power of the stock market in telling the results of a general election, you might want to check out this article How Stock Markets Around The World Have Correctly Predicted Elections 80% Of The Time.

Layers Of Support In The US Market Indices

Although the markets are easily affected by elections around the world, I think there should be no fear for US market investors. All we have to do is to look at the charts and we will be able to see that there are layers and layers of support in the 60 min charts as well as the daily charts.

This is good because in the event of a shock victory, there might be a sell off. But the sell off will be mitigated as the indices meet the support areas. A surprise testimony by James Comey which may shock the markets will also be mitigated by the support areas. Stocks do not sell off in one straight line but they tend to halt a bit and give a relief to investors when they hit support areas.

As we can see from the chart above, the S&P 500 futures is currently consolidating in its 60 min chart. The last time it consolidated, it broke out and the markets shot higher. Hopefully, this time the consolidation will result in another break higher.

The ETF of the S&P 500 index, the SPY also looks quite healthy at the moment. It found support at the rising 60 min 50 MA. Hopefully it will break out higher.

The above chart of the DJIA shows that the Dow Jones have already moved above a big box. It has won the big battle of the consolidation and is now in new territory. There are ample layers of support below which we will be able to rely on.

Semiconductors Lead & Apple Is Trying To Shoot Higher

With semiconductors leading the market we can have faith that the world economy is getting better and better. Semis are an indication of the health of world markets and with it in an uptrend, I believe stock markets all over the world (with some exceptions) will continue to benefit from rising semiconductors.

Apple is another stock that you might want to look at carefully. Especially if you trade tech stocks all over the world. The stock recently formed a pennant and as it trades, it now looks like it is trying to form an ascending triangle. An ascending triangle is a bullish continuation pattern and if it breaks out, this stock will move higher and bring tech stocks all over the world higher with it. Of course, the Dow Jones, SPX and Nasdaq will also benefit. If Apple is rising and the semis are rising, this can only be good for the market as a whole.

QQQ tells the same story as the other index ETF. Currently it is consolidating and a nice breakout above the 60 min consolidation will most likely send stocks even higher.

With the drop in oil prices, airlines continue to benefit from it. We can see how AAL is trying to go higher above the old highs. The measured move target will send it slightly above the old highs. I think the congestion area around the old highs will have been absorbed by the recent weekly rally.

Fedex Hints Of A Growing World Economy

Fedex which transports all kinds of stuff around the world in spectacular speed is often a hint of a growing economy. I would doubt the growth numbers if Fedex does not go up. The more money Fedex makes, it means the better the economy around the world is. With Fedex recently breaking out of a weekly consolidation at support pattern, this hints to us that things are going to get better and better for the world stock market and the US stock market.

You might also want to have a look at Yahoo. This stock has been trying to breakout and with it touching the 20 MA, perhaps it may shoot higher.

The Malaysian KLCI had a really impressive gain and it has won the daily box battle. Some correction is expected and the old highs that have been overcome will now act as support. As long as the support hold things should be alright for KLCI. The nice run up has slowed down and traders can use the 60 min 20 MA as a gauge of when to enter and when not to enter stocks. Usually when indexes are below their 60 min 20 MA, stocks don't perform that well. Anyway KLCI is dropping very nicely and might want to see if it can break a downtrendline at support especially if Dow performs very well today.

In summary:

  • No matter what the UK Election brings and the Comey testimony brings, the US stock market is still healthy
  • The world's economy is expanding and things are getting better for most world stock markets
  • With semis leading, lets continue to be bullish
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