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Dow Jones Technical Analysis: Index Consolidates its Gains – 25 May 2022

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Our expectations remain that the index will return to the decline during its upcoming trading.

The Dow Jones Industrial Average rose during its recent trading at the intraday levels, to achieve gains for the third consecutive day, by 1.98%, to add to it about 48.38 points. It settled at the end of trading at the level of 31,928.63, after rising in Monday’s trading by 1.98%.

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During the session, 18 of the 30 index components rose, and the stocks advanced by a percentage, McDonald’s Corp. by 2.74%, followed by Verizon Communications Inc. increased by 2.03%, then the share of International Business Machines Corp. by 2.01%.

Wednesday will mark the 100th trading day of 2022, a year likely to be remembered for the historic market turmoil as long-dominant tech stocks collapsed in what was their steepest decline since the dot-com crash.

The Dow is on track for the 100 worst trading days since 1970, with analysts blaming the inevitable burden of inflation that is being deducted from future corporate profits due to increased costs driving down their value in the present.

Meanwhile, stock futures rose slightly on Wednesday, signaling a positive start on Wall Street as investors await the release of the Federal Reserve’s latest meeting minutes to take a deeper look at the central bank’s plans to tighten monetary policy.

The Federal Reserve raised interest rates by half a percentage point when it last met on May 4, the first time in 22 years that the Fed has raised interest rates by this amount and unveiled plans to begin shrinking its balance sheet next month. Federal Reserve Chairman Jerome Powell also indicated that an additional 0.5% rate hike can be expected at the next meeting in June, and Wall Street expects another 0.5% increase in July.

Technically, the index’s rise comes with the influx of positive signals in the relative strength indicators. This is after it reached earlier areas of oversold activity, which gained the index some positive momentum due to its need to dispose of this oversold. It is also trying to compensate for part of what it incurred from previous losses. Its trading remained within a bearish corrective price channel limiting its previous trading in the short term, in addition to the continuation of the negative pressure for its trading below the simple moving average for the previous 50 days. It brought the index close to its recent rise from retesting the main resistance level 32,000.

Therefore, our expectations remain that the index will return to the decline during its upcoming trading, especially in the event that the resistance level 32,000 remains stable, to target the support level 30,547.50.

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