The Dow Jones Industrial Average rose in its recent trading at the intraday levels to achieve sharp gains in trading on Monday and for the second day in a row, by 1.17%. It added about 406.39 points to the index, and settled at the end of trading at the level of 35,131.87, after rising on Friday by a rate of 1.65%. During the month of January, the index fell by 1,206.44 points, or 3.3%, which is the largest drop for the index in one month since last November.
Investors are wary of what a weak contraction in January means for returns for the remainder of the year, based on seasonal trends.
Meanwhile, three Fed policymakers offered their views on the future course of policy, with San Francisco Fed President Mary Daly saying that the next central bank rate hikes should be "gradual, not sharp". While Esther George of the Federal Reserve Bank of Kansas City said a sharp cut in the central bank's balance sheet of $9 trillion could allow the Fed to pursue a less aggressive strategy in terms of short-term interest rates.
Their colleague Rafael Bostick of the Federal Reserve in Atlanta reiterated that he expects hikes by three-quarters of a point in 2022. He also said he does not favor a half-point rate hike in March but wants to keep options open.
Technically, the index rose in its recent trading with the aim of discharging its clear oversoldness with the relative strength indicators. This is with the influx of positive signals from them, to retest a major ascending trend line that the index had broken earlier, as shown in the attached chart for a (daily) period. The bearish corrective wave remained dominant in the short term, with the negative pressure continuing to trade below the simple moving average for the previous 50 days.
Therefore, we still expect the index to return to decline during its upcoming trading, especially if the main resistance level 35,000 remains intact, to target the pivotal support level 33,833.30.
