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Dow Jones Technical Analysis: Index Continues to Fall

The Dow Jones Industrial Average declined during its recent trading at the intraday levels, to record losses for the fourth consecutive session, by -0.67%, to lose about -208.54 points. It settled at the end of trading at the level of 30,772.80, after its decline during Tuesday’s trading by – 0.62%.

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The seasonally adjusted US CPI rose 1.3% in June, ahead of expectations for a 1.1% increase and after a 1% rise in May. The core CPI, which excludes the more volatile food and energy prices, increased 0.7%, higher than the consensus estimate of a 0.5% increase. While the annual rate of the general CPI accelerated to 9.1% from 8.6% in May.

Food prices rose 1%, energy prices increased 7.5%, and gasoline prices alone increased 11.2%, while price pressures remain concentrated in rising food and energy costs.

While core inflation appears to have peaked with categories like airfares, this offers little relief to Americans still filling their cars with more than $4.60 a gallon of gasoline and struggling to buy food.

The report raised the prospects of the Federal Reserve raising interest rates more than the previously expected 75 basis points, as futures traders tied to the federal funds target rate priced the possibility of a further 100 basis points rise at the conclusion of the policy meeting later this month.

Technically, the index’s decline comes with the beginning of negative signals on the relative strength indicators, after they reached areas of overbought operations, in light of the dominance of the corrective bearish trend in the short term, and its trades along major and minor bearish slope lines, as shown in the attached chart for a (daily) period. At the same time, it suffers from the continuation of the negative pressure for its trading below the simple moving average for the previous 50 days.

Therefore, based on the above, we expect more decline for the index during its upcoming trading, as long as the resistance level 31,885.00 remains intact, to target again the important support level 29,653.30.

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