Index is in a Free Fall

The Dow Jones Industrial Average slipped during its recent trading at the intraday levels, to record losses for the fourth consecutive day, by -2.79%, to lose the index towards -876.05 points. It settled at the end of trading at the level of 30,516.75, after its decline during Friday’s trading by – 2.73%.

The stock market has now fallen to new lows for the year, which is in bear market territory, with a bear market defined as a drop of more than 20% away from the index’s highest peak.

This comes as markets anticipate more Fed rate hikes in the future, and the Fed was expected to raise rates by half a percentage point at each of its summer meetings. However, it is now expected to raise interest rates in September after the Central Bank’s meeting minutes indicated that slowing economic growth may force the Fed to slow the pace of rate hikes. Barclays economists now expect the Fed to raise the federal funds rate by three-quarters of a point at its next meeting.

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The index incurred those losses after Friday’s inflation reading showed that the consumer price index rose 8.6% on an annual basis in May, higher than the previous reading of 8.3%. Contributing to this was the rise in the prices of services such as hotel and airline prices, as well as oil and food. Now it seems that the Fed has no choice but to remain firm in raising interest rates.

Technically, the index faces a number of negative pressures, which led it to deepen its losses at the beginning of the week’s trading. The dominant trend is the short-term bearish corrective trend along a slope line, with the continuation of the negative pressure for its trading below the simple moving average for the previous 50 days. Negative signs on the relative strength indicators, as the index crossed in its last sessions the main support level 31,000.

Therefore, our expectations indicate that the index will continue to decline during its upcoming trading, especially throughout its stability below the 31,000 level, to target the important support level 29,500.