During the trading session on Tuesday, the stock indexes in the United States saw notable declines, marking a shift in market sentiment. This change signaled a move towards a bearish perspective, a trend not seen for a considerable period. The Dow Jones Index, in particular, reached a critical juncture – the H1 - H4 support levels. These levels are seen as pivotal in determining the future trajectory of the index. Analyzing the current technical situation of the DJI / Dow Jones index is essential to understand the potential impacts of these support levels and the broader market implications.
On that Tuesday, the Dow Jones Industrial Average experienced a significant downturn, dropping by 1.00%, which translated to a loss of 395 points. This downturn was a part of a broader market trend observed across several major indexes. Notably, UnitedHealth Group Incorporated faced the most significant drop within the Dow Jones Index, plummeting by 6.44%. In parallel, the Nasdaq 100 – often considered the technological sibling of the Dow Jones – also declined by 0.94%. Within this tech-heavy index, Tesla Inc. saw a substantial fall of 4.90%.
Similarly, the S&P 500 index wasn't immune to this downward trend, recording a fall of 0.72%, with Humana Inc. experiencing a stark decrease of 13.41%. These figures reflect a general bearish sentiment across various sectors, indicating broader market uncertainties and investor caution.
The trading session of the previous day marked the continuation of a downward trend, being the second consecutive session with declining performance. However, it was particularly notable for the distinct pressure exerted by the bearish camp. This pressure was evident in the way the Dow Jones Industrial Average (DJIA) led the market downturns, influenced by strong economic indicators from the US.
The factors driving this trend included robust data on factory orders and the release of JOLTS job openings data. These economic indicators played a crucial role in shaping investor sentiment and market dynamics, illustrating the intricate relationship between economic data and stock market performance.
The manufacturing sector in the USA demonstrated resilience and growth in February, with orders for manufactured products rising by 1.4%. This increase followed a previous drop of 3.8% and exceeded market expectations of a 1% growth. Additionally, the labor market exhibited signs of robustness, with the number of job openings slightly increasing from 8.748 million to 8.756 million. This number surpassed market predictions of 8.74 million, further indicating a tight and competitive job market.
Such economic conditions, though positive in terms of economic growth and labor market health, complicate the scenario for reducing external financing costs. Cleveland Fed President Loreta Mester's comments on Tuesday about the potential for interest rate cuts within the year, without specifying a timeline, contributed to an increase in bond yields and the strength of the American dollar. This situation resulted in a decline in stock prices as investor expectations adjusted, particularly diminishing hopes for a rate cut as early as June. The interconnectedness of these economic factors underscores the complex influences shaping market behavior.
The current position of the Dow Jones index is of particular interest, especially considering its recent decline to a critical support zone, identified as H1 – H4. This level, as illustrated in the accompanying chart, is of great importance in technical analysis. In the upcoming trading session, it will be crucial to monitor the index's behavior, particularly around the 39,000 – 39,100 points range for the cash market and the 39,350 – 39,400 range in the futures market, which are approximately equivalent. If the index sustains its position within this zone and demonstrates a demand-driven recovery, it could potentially lead to a market rebound of 250 – 290 points. This rebound would bring the index back to one of the most volatile levels witnessed in the previous session.
However, should the index break through this support level, the outlook becomes less optimistic. In such a scenario, the market could be poised for an additional decline of 300 – 350 points, indicating a deeper bearish trend with no immediate signs of recovery. This analysis highlights the critical nature of support levels in determining market movements and investor strategies.
03.04.2024
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