Dow Jones Technical Analysis: Index Deepens its Losses

We expect the index to continue declining during its upcoming trading.

The Dow Jones Industrial Average continued to decline during its recent trading at the intraday levels, to record losses for the third consecutive day, by -1.99%, to lose about 653.67 points. It settled at the end of trading at the level of 32,245.71, after declining in Friday’s trading by -0.30%. 

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Last week, the index suffered its longest streak of weekly losses since May 2019, and if it closes this week on a new low, it will be one of the worst consecutive weekly drops since 2002.

The sell-off in the Dow Jones Industrial Average on Monday puts it on the right track to make the consensus of analysts a bearish trend, forming a bearish pattern of lower lows and lower highs. There are also those who suggest that despite the choppy movement, the market is still a bit quiet so that the current lows are not the last.

The index broke below the March 8, 2022, closed at 32,632.64, hitting its lowest level since March 9, 2021.

Specific economic events that might have driven the sharp decline were noticeably absent, some news was citing a higher than previous survey of inflation expectations released by the Federal Reserve in New York.

Traders are likely to continue to face a challenging fundamental environment for risky assets. The Federal Reserve is about to begin to undo its balance sheet of nearly $9 trillion, and inflation continues to rise around 40-year highs. At the same time, the Chinese economy is slowing amid a strategy with tough measures to prevent the spread of the novel coronavirus, which could worsen global supply chains. Traders are also preparing to release the latest US inflation report this week.

Technically, the index confirmed its recent closing of breaking a major bullish trend line in the medium term, as shown in the attached chart for a (daily) period, considering the continuation of negative pressure for its trading below the simple moving average for the previous 50 days. This is amid the control of a bearish corrective wave in the long term. In addition, we notice the return of negative signals on the RSI indicators, despite their stability in oversold areas.

Therefore, we expect the index to continue declining during its upcoming trading, as long as the resistance level 33,271.93, especially in case it breaks the current support 32,071.40, to target the support level 30,547.50 after that.