E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Seeing Rotation into Financials, Energy

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March E-mini Dow Jones Industrial Average futures are expected to open the pre-market session steady to better based on the strength of the global stock markets on Monday. In yesterday’s limited trade, the index closed higher on extremely low volume. Investors will have to decide whether to chase the market higher or play for a pullback into Friday’s close.

With the cash market closed, we don’t think we have a “tail-wagging the dog” situation with the futures leading the cash market higher, but we do have confidence that investors may follow the global stock indexes higher, which finished sharply higher on Monday.

Global stocks rallied as investors took comfort in progress on the COVID-19 vaccine rollout. The FTSE 100 Index finished up 2.5% after the U.K. recorded 15 million vaccinations against coronavirus. Japan’s Nikkei 225 Stock Average topped 30,000 yen for the first time since August 1990 on data showing the economy is charging ahead.

Bloomberg is saying the relation trade remains alive and well. Global equities are on course to rise for 11 straight sessions – the longest stretch since 2009 – and the Treasury yield curve has tested the steepest levels in more than five years. Investors are banking on U.S. government spending and vaccines to drive the economy out of the pandemic.

“The reflation trade is set to continue to gather steam with vaccine deployment and massive fiscal spending by the Biden administration,” said Esty Dwek, head of global market strategy for Natixis Investment Managers Solutions. “Yields are likely to rise further and the catch-up of cyclical sectors should continue.”

Apple, Microsoft Could Be a Drag on Dow

Dow traders should pay particular attention to shares of components Apple Inc and Microsoft Corp because they are at the center of the current stock rotation.

There is evidence that investors are moving money into energy, financials and material sectors on expectations they will benefit from a reopened economy, while limiting their purchases of tech heavyweights Apple Inc and Microsoft Corp.

Dow components in the energy sector include Chevron Corporation. American Express, Goldman Sachs, JPMorgan Chase, The Travelers Companies and Visa Inc are in the financial sector. Materials stocks include 3M Company, Caterpillar and Dow Inc.

For a look at all of today’s economic events, check out our economic calendar.