Dow Jones Technical Analysis: Index Consolidates its Gains

The Dow Jones Industrial Average rose during its recent trading at the intraday levels, to achieve gains for the second day in a row, by 0.80%, to gain about 264.36 points. It settled at the end of trading at the level of 33,180.15, after rising slightly during Monday’s trading by 0.05 %.

The index advanced on Tuesday after trading lower early in the session, while government bond yields fell after the World Bank cut its forecast for economic growth around the world including the United States.

The energy sector led the gainers, while the only loser was the consumer sector, weighed down by Target (TGT) cutting operating margin guidance for the second quarter of the fiscal year. Walmart (WMT) and Home Depot (HD) also closed lower.

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The World Bank said on Tuesday that global economic growth is likely to lose momentum this year, with the Ukraine war, soaring inflation and rising interest rates, threatening what it now sees as an “unstable recovery”. Real GDP is now expected to rise by 2.9% in 2022, much less than the expected 4.1% rise in January, and the US economy is expected to expand by 2.5% this year, 1.2 percentage points lower than previous forecasts.

Technically, the index, despite its recent rises, remains stable below the important resistance level 33,271.90, amid its trading within the range of a bearish corrective price channel. It limits its previous trading in the short term, as shown in the attached chart for a (daily) period, with the negative pressure continuing for its trading below the simple moving average. For the previous 50 days we notice the start of negative signals in the RSIs, after forming what is known as negative divergence. This is a result of reaching highly overbought areas, in a much exaggerated way compared to the movement of the index, which means more negative pressure on the upcoming index trades.

Therefore, our expectations suggest a return to the index’s decline during its upcoming trading, as long as the resistance level 33,271.90 remains intact, to target the main support level 32,000.