Dow Futures 2023 Preview
Dow Futures 2023 Preview
How is the Dow trading as we close out 2022?
Dow futures are currently trading at 33,301, down about 8.34% from its opening price of 2022. The Dow is up only a few hundred points from the last Dow futures update two weeks ago.
The last three weeks of Dow futures trading have been slow. Volatility is down and any hope of a follow-through rally into January has vacillated. That’s not terrible news though, since any selling from here will bring back volatility.
The market rally that started in mid-October led us to where we are now. We’ve sold off slightly from that rally, but the motivation to sell off further doesn’t appear to exist for the moment.
We have entered a near-term bear trend, but selling pressure is only making small advances for now.
Fig. 1: Year-to-date price percent change for SLV, DIA, IWM, and TLT.
Where will the price go as the new year approaches?
Since buying pressure has teetered off and selling pressure is not incredibly strong now, it seems as though we will remain in this general range through the new year. Somewhere in the range of 32,605 and 34,076.
As the new year arrives, the market will position itself for the start of 2023. Any anticipated events that have not yet been fully acted on will begin to take shape. If the market happens to be priced too optimistically right now, we will see selling into the new year.
Given the current price position, it is likely that Dow futures will want to sell off in January. It could be a quick sell-off if buyers are strong, or we could move down to trade in a new range for the start of 2023.
What will happen in 2023?
The near-term bottom that the Dow posted at the start of October represents a level of fear that exists in the market in 2023. The strong rally from this price level is a positive indication of further bullish movement.
Markets like to test and retest support and resistance before moving to new trading ranges. It is likely that Dow futures will trade around the low that we saw in October. If we do get this test, we will be able to observe how price reacts to reaching this price level again.
If we retreat from this price level quickly again, look for continued buying pressure in 2023. If we push lower from here, test 2022 lows and remain in that range, look for mixed markets in 2023 that might not test all-time highs.
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