Dow Jones Technical Analysis: Suffers from Negative Pressure

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 fifth consecutive day, by -0.50%, to lose the index towards -151.91 points. It settled at the end of trading at the level of 30,364.84, after its decline during Monday’s trading by – 2.79%.

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As markets prepare for a more aggressive policy tightening from the Federal Reserve on Wednesday, some analysts still believe the FOMC will stand by the 50 basis point increase it has been hinting at in recent weeks, as yesterday’s sharp market sell-off marks investors who have finally acclimatized. With painful steps that will be required to bring down high inflation to its highest level in 40 years, markets believe that the US Federal Reserve will need more rate hikes to try to slow demand and control inflation.

A pair of sentiment indicators and the monthly producer price report served as the key US data points on Tuesday, with the producer price index rising 0.8% in May after rising 0.4% in April, with energy prices up 5% and food prices stable. The National Federation of Independent Business monthly sentiment index fell slightly to 93.1 in May from 93.2 in the previous two months. The Daily Business Investor Confidence Index, the first consumer gauge for June, fell to 38.1 from 41.2 in May, the lowest level since August 2011. A reading below 50 indicates more pessimism.

Technically, the index suffers from the continuation of negative pressure for its trading below the simple moving average for the previous 50 days. Negative signals are appearing in the RSI indicators, despite reaching oversold areas. All of this comes in light of the index’s trading along a corrective bearish slope line in the short term, as shown in the attached chart for a time period (daily).

Therefore, our expectations indicate more decline for the index during its upcoming trading, throughout its stability below the main resistance level 31,000, to target the support level 29,550.