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 in its last sessions, by -0.81%, to lose the index by -269.24 points. It settled at the end of trading at the level of 32,910.91, after rising by 0.80% during Tuesday’s trading.
US stocks fell on Wednesday, with Treasury yields rising above the psychologically important 3% level, while oil prices jumped, raising concerns about inflation and interest rate expectations. The 3% level investors focus on because it represents an increase in interest rates and a reflection of inflation and market volatility.
Markets are now eagerly awaiting inflation data when the CPI is released at the end of the week, and economists expect prices to have risen 8.2% annually in May, compared to an 8.3% increase in April. Markets want to see inflation fall much faster.
The Federal Reserve is expected to raise interest rates by half a percentage point in June and July when it meets next week. But with inflation stabilizing at its highest levels in four decades, the Fed could remain aggressive about raising interest rates in the fall.
Meanwhile, the Organization for Economic Co-operation and Development lowered its forecast for global economic growth for this year to 3% from 4.5%, and forecast growth to slow to 2.8% in 2023, citing a “new set of adverse shocks” due to Russia’s invasion of Ukraine. Closures in China related to combating the outbreak of the emerging corona virus.
Technically, the index’s decline came as a result of the stability of the important resistance level 33,271.90. This is resistance that we had referred to in our previous reports, in light of the dominance of the corrective bearish trend in the short term. It is trading within the range of a bearish price channel, as shown in the attached chart for a (daily) period. We note that divergence is negative with the relative strength indicators, after reaching the areas of severe overbought. This is in an exaggerated manner compared to the movement of the index, with the start of the influx of negative signals from them. There is continuing negative pressure of its trading below the simple moving average for the previous 50 days.
Therefore, our expectations indicate more decline for the index during its upcoming trading, as long as the resistance 33,271.90 remains intact, to target the main support level 32,000.
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