- The Dow Jones Industrial Average declined during its recent trading at the intraday levels breaking a series of gains that continued for three consecutive days.
- It recorded losses in its last sessions by -1.95% to went down by about -646.89 points, closing the index near the lowest levels of the session at 32,513.95.
- This happened after the index rose in trading on Tuesday by 1.02%.
While the better clarity on the political front after the US midterm elections regardless of the outcome has always tended to lift stocks, economists say this year could be different. The index recorded its worst daily performance, a day after any US election in a decade.
The prevailing view on Wall Street was that a divided government could be beneficial for equity valuation because it could reduce regulatory uncertainty. This is because it reduces the likelihood of more corporate taxation and reduces government spending, helping to lower inflation.
Separately, Richmond Fed President Thomas Barkin said on Wednesday that the Fed should not stop raising interest rates for fear of provoking an economic slowdown.It risks a stronger return of inflation, which will require tougher measures going forward.
Investors' focus will now shift from the ballot box to the CPI due later Thursday. Thursday's CPI report is expected to show an 8% year-over-year rise, slightly reversing September's 8.3% rate. While the core rate, which does not include the more volatile food and energy prices, is expected to rise 6.5%, compared to 6.3% in the previous month.
Dow Jones Technical Analysis
Technically, the index’s decline came as a result of its testing of the resistance of a bearish corrective slope line in the short term, as shown in the attached chart for a period of time (daily), in conjunction with testing the 33,272.34 resistance level. That resistance that we had referred to in our previous reports, and we note after the performance of the index, the return of negative signals on the relative strength indicators, after reaching earlier areas of severe overbought operations. In front of that, the positive support for its trading remains above its simple moving average for the previous 50 days.
Therefore, our expectations indicate more decline for the index during its upcoming trading, as long as the 33,272.34 resistance remains intact, to target the important 31,727.00 support level.
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