Dow Jones Technical Analysis: Index Continues to Decline

Our expectations indicate more decline for the index during its upcoming trading.

The Dow Jones Industrial Average declined during its recent trading at the intraday levels, to record losses for the fourth consecutive day, by -0.26%, to lose about 84.96 points. It then went to settle at the end of trading at the level of 32,160.75, after its decline in Monday’s trading by -1.99%.

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16 components of the 30 index fell, with the worst affected stocks being financial stocks, amid continuing uncertainty about the economic outlook. The Federal Reserve follows a violent cycle of interest rate increases and other measures aimed at curbing inflation, which is running at its highest levels in more than four years.

With a so-called soft landing, the Fed was able to tame inflation without causing a recession, while a hard landing necessitated the central bank’s control of inflation through sharp interest rate increases that lead to a recession.

As for the gainers listed on the index, most of them were technology shares after they found some support from the decline in treasury bond yields, as high long-term bond yields make future profits, which are characterized by technology stocks, less valuable at the present time.

There is one potential catalyst this week that could eventually slow down the selling in the market and that is the US inflation data due to be released later in the day on Wednesday. The CPI is expected to have declined to 8.1% in April from the 8.5% reading the previous month. Low inflation is the only thing that can give investors hope.

Technically, the bearish corrective trend dominates the index’s movement in the short term, in light of its being affected by the breach of a major bullish trend line earlier. This is shown in the attached chart for a (daily) period, with the negative pressure continuing for its trading below the simple moving average for the previous 50 days. We notice the influx of negative signals on the relative strength indicators, despite their stability in oversold areas.

Therefore, our expectations indicate more decline for the index during its upcoming trading, especially in case it breaks the current support level 32,000, to target after that the support level 30,547.50.