Dow Jones Average expects volatility on Quad Witching Day – Crypto News – Crypto News
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Dow Jones Average expects volatility on Quad Witching Day – Crypto News

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  • June 16 is Quad Witching Day as quarterly and monthly options and futures expire.
  • The Dow Jones index should experience higher than average volatility on Quad Witching Day.
  • The Michigan Consumer Sentiment Index, released on June 16, is expected to be positive.
  • The DJIA is trading within the 34,250 to 34,600 resistance band.

Friday, June 16, is the day you’ve all been waiting for: Quad Witching Day. Stock index futures, stock index options, stock options, and single-stock futures derivatives contracts all expire at the closing of Friday’s session, so volatility and higher volumes are to be expected. The Dow Jones Industrial Average (DJIA) rebounded on Thursday to close up 1.26%. This was its largest gain since June 2. The large-cap index has been steadily reducing the distance between it and the 1-year high in recent weeks.

At the time of writing in Friday’s premarket, Dow futures are down 0.03%, while S&P 500 and NASDAQ futures are marginally green.

Dow Jones Index News: Quad witching to boost volatility

If you’re a nerd, you’re probably screaming about Quad Witching Day no longer being extant. That is true. What is popularly called Quad Witching since 2020 has been Triple Witching. This is because single-stock futures ended in the US markets at that time. However, they do still trade outside the US.

However, index options, index futures and stock options still expire once every quarter, and this quarter that day is June 16. As traders and institutional investors close out many of their options and derivatives contracts, or roll them into new contracts, typically these Quad (Triple) Witching days offer higher levels of overall volumes in the market. These high volumes can lead to higher-than-average volatility as well. To be sure, much of this volume is in the options and futures markets, not the normal equity market.

Still, an index like the Dow Jones Industrial Average still often witnesses some gyration in price action. During the last Quad Witching Day on March 17, the Dow dropped 1.19%.

Michigan Consumer Sentiment Index expected to read positively for June

Also on Friday at 14 GMT, thus following the opening bell, the University of Michigan is set to release its preliminary figure for consumer confidence in June. The survey tries to determine if the average US consumer feels confident enough about their financial situation and the broader labor market to spend the money. Since about 70% of the US economy is driven by consumer spending, economists and market participants alike view the Michigan Consumer Sentiment Survey as a means of gauging the health and direction of the economy.

Consensus for this month’s index is 60, which is above and thus a better reading than May’s 59.2 reading. Higher numbers are better than lower numbers, and higher numbers generally boost the value of the US Dollar, May’s reading beat expectations for 57.7.

Dow Jones FAQs

What is the Dow Jones?

The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.

What factors impact the Dow Jones Industrial Average?

Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily dependent. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

What is Dow Theory?

Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criterion. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.

How can I trade the DJIA?

There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.

Dow Jones forecast

The Dow Jones index thrust its way this week into the resistance zone that spans 34,250 to 34,600. Closing at 34,408 on Thursday means the Dow index could require a few more sessions to break above the top of the resistance zone. Of course, the index has only traded above the top of this resistance zone one time in the past year. That was December 13, 2022, when a quick surge to 34,712 flopped, and the index promptly sold off all the way to 33,890 by the end of that session.

This history puts the DJIA in a precarious position then at the moment. Bulls want to see a new 1-year high above 34,712 but know this region commonly launches month-long downtrends. If bulls can make it through this thicket to a new 1-year high, then the next challenge will be the 35,200 to 35,750 resistance band that experienced plenty of price action and volume between October 2021 and April 2022.

DJI daily chart

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