Dow Jones Technical Analysis: Gaining Positive Momentum

We expect the index to return in 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 -1.19%, to lose the index towards -413.04 points. It settled at the end of trading at the level of 34,308.09, after rising by 0.40% in Friday’s trading.

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Twenty-six of the index’s 30 components declined in trading on Monday, with the decliners being the most, by percentage, Microsoft Corp. by -3.94%, and American Express Co. by -3.34%, followed by Cisco Systems Inc. by -2.58%.

Technology stocks were pressured by higher bond yields, with the yield on the 10-year Treasury rising 6.6 basis points, or 2.78%, the highest since Jan. 18, 2019, according to market data from Dow Jones.

The 30-year index rose by 7.5 basis points to 2.82%, the highest level since May 21, 2019. The 10-year and 30-year interest rates rose for their seventh and sixth trading days, respectively.

Returns move in the opposite direction to prices.

Higher bond yields are a headwind for stocks especially technology stocks and other stocks whose valuations are based on expected earnings and cash flow far into the future. Higher yields on risk-free treasuries mean those future inflows are less valuable in present value terms.

Technically, the index based its recent decline on the support of its simple moving average for the previous 50 days, in an attempt to gain positive momentum that might help it recover and rise again. This is with the dominance of the main bullish trend in the medium term, with the beginning of a positive crossover in the relative strength indicators, after it reached oversold areas. It reached in an exaggerated way compared to the movement of the index, but in front of that the corrective bearish trend dominates over the short term, as shown in the attached chart for a (daily) period.

Therefore, we expect the index to return in its upcoming trading, as long as the main support 34,000 remains intact, to target the important resistance level 35,372.26.