Dow Jones Technical Analysis: Breaking Through Ceiling

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

The Dow Jones Industrial Average rose during its recent trading at the intraday levels, to achieve gains in its last sessions, by 0.27%, to gain about 94.65 points. It settled at the end of trading at the level of 34,955.90, after rising by 0.44% in Friday’s trading.

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The yield curve continued to decline, meaning that short-term interest rates are catching up with long-term rates, the two-year Treasury yield rose 0.06 percentage point to 2.34%, while the 10-year yield fell 0.02 percentage point to 2.46%. This indicates that the recent inflation may damage economic growth in the long run. It’s no surprise to see the Dow Jones, which is made up of growth-sensitive stocks, performs the worst out of the three major indices.

The concern that upcoming interest rate hikes by the Federal Reserve would slow the economy, supported technology stocks. When that happens often the most economically sensitive stocks underperform, while investors go to the fast-growing technology companies who are in the tech sector. When economic demand slows, inflation will eventually do the same, which determines any increases in long-term bond yields. Low bond yields increase the value of future earnings, and many growth and technology stocks are valued on the basis that they will deliver significant profits many years into the future.

Technically, the index is positively affected by its exit from the range of a bearish corrective price channel that limited its previous trading in the short term. It was shown in the attached chart for a (daily) period, taking advantage of the positive pressure coming from its trading above its simple moving average for the previous 50 days. This is in addition to the influx of signals, positive RSI indicators, despite reaching overbought areas. All of this comes in light of the dominance of the main bullish trend over the medium term.

Therefore, our expectations indicate more rise for the index during its upcoming trading, as long as the main support level 34,000 remains intact, to target the first resistance levels at 35,631.20.