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Dow Jones Technical Analysis: Index Breaks a Four-session Losing Streak – 12 October 2022

Overall trading was choppy as investors were cautious ahead of key inflation data in the US and the start of third-quarter earnings later this week.

The Dow Jones Industrial Average rose by its recent trading at intraday levels, to achieve its first gains in five consecutive sessions.This happened despite closing far below the session’s highest levels, to record a gain of 0.12% and increasing about 36.31 points.The index settled at the end of trading at the level of 29,239.20, after it decreased in Monday’s session by 0.32%.


Stock markets are crashing again

The Dow ended higher with the support of AMGN Inc whose shares jumped 5.7% after a report that Morgan Stanley upgraded the drug company’s stock rating to “overweight” from “equal weight”.

Earlier in the session, the index fell after Bank of England Governor Andrew Bailey asked pension fund managers to finish rebalancing their positions by Friday. This happened at a time when the Bank of England is set to end its emergency bond market support program in the country.

Overall trading was choppy as investors were cautious ahead of key inflation data in the US and the start of third-quarter earnings later this week.

The International Monetary Fund on Tuesday confirmed its global growth forecast of 3.2% for 2022 but lowered the forecast for 2023 by 0.2 percentage points to 2.7%. The bank expects global inflation to reach 8.8% in 2022 but fall to 6.5% in 2023 and 4.1% in 2024.

Estimates of US output were cut 0.7 percentage point to a 1.6% expansion for 2022, pointing to an unexpected contraction in GDP in the second quarter. The International Monetary Fund expects the world’s largest economy to stall in the fourth quarter compared to a year earlier while leaving the country’s growth forecast for 2023 steady at 1%.

The market will be dealing with US producer price data on Wednesday and consumer price data on Thursday, reports that should further influence investors’ thinking about the Fed’s policy path.

Technically, the index is trying with this rise to compensate for part of its previous losses, during a negative divergence in the relative strength indicators, after it reached areas of oversaturation with overbought operations. This is exaggerated compared to the movement of the index, with the start of the influx of negative signals from it. The index is under the control of a bearish corrective wave on the short term is aligned with major and minor slope lines, as shown in the attached chart for a (daily) period, with the negative pressure continuing to trade below the simple moving average for the previous 50 days.

Therefore, our expectations suggest the return of the index’s decline during its upcoming trading, especially throughout its stability below the level of 29,653.30, to target the support level of 28,402.50.

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