The Index is Back Down

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

The Dow Jones Industrial Average returned to decline during its recent trading at the intraday levels, to record losses in its last sessions, by -0.15%, to lose the index by -47.12 points. It settled at the end of trading at the level of 30,483.14, after rising by 2.15% in Tuesday’s trading.

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US stocks turned lower in the volatile Wednesday session, with government bond yields continuing to slide, as investors listened to Federal Reserve Chair Jerome Powell’s comments about the central bank’s future actions to tame inflation.

The real estate and healthcare sector was the biggest gainer among the sectors, while the energy sector was the biggest loser.

On Wednesday, Powell said in prepared remarks before the Senate Committee on Banking, Housing and Urban Affairs that the FOMC will act as needed to bring down inflation. He reportedly said that nothing was off the table in response to a question about the possibility of a 100 basis point hike.

He said the Fed was “strongly committed to bringing inflation back down” and “moving quickly to do so”. Powell said last week that interest rates will likely rise by 50-75 basis points in July.

The key economic data released on Wednesday was the weekly mortgage applications released by the Mortgage Bankers Association which showed a 4.2% increase in the week ending June 17 after a 6.6% rise the previous week. Refinancing activity slowed due to mortgage rates rising to their highest level since November 2008, but new purchase orders jumped despite the higher rates.

Technically, the index suffers from the continuation of negative pressure due to its trading below the simple moving average for the previous 50 days. This is in light of the dominance of the short-term corrective trend along a slope line, as shown in the attached chart for a (daily) period. In front of that we notice the start of the influx of positive signals on the relative strength indicators, after it reached oversold areas, which may curb the index’s upcoming losses.

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 28,958.