We expect more decline for the index during its upcoming trading, especially if it breaks the support 34,690.25, to target the support level 34,000.
The Dow Jones Industrial Average declined in its recent trading at the intraday levels, to record losses in a session characterized by high volatility, by -0.16%, to gain about -54.57 points, to settle at the end of its trading at the level of 34,934.28, after rising 1.22% in Tuesday’s trading.
The Fed minutes were released and did little to change the perception that the Fed might raise interest rates by 50 basis points in March. They also revealed something else related to tighter monetary policy. “A significant reduction in the size of the balance sheet is likely to be appropriate,” the minutes stated.
The minutes indicate that the Fed may sell bonds, this could significantly pressure the price of long-term Treasuries, which could lead to higher yields. Higher long-term bond yields make future earnings less valuable, which leads to lower stock valuations. The 10-year Treasury yield held steady at just over 2%.
Markets were already expecting the worst from the Fed, which is that the central bank will raise interest rates by 50 basis points, instead of 25, to stave off rising inflation. As the Fed did not provide any worse news, the market greeted this with optimism.
On the economic data front, January retail sales rose 3.8% m/m, beating expectations of 2% and rising above the 2.5% drop seen in the previous result.
Technically, the index suffers from the continuation of negative pressure for its trading below the simple moving average for the previous 50 days. This is with the influx of negative signals in the relative strength indicators, after reaching highly overbought areas, and under the control of a bearish corrective wave in the short term, to prepare again with this decline, breaking the support level 34,690.25.
Therefore, we expect more decline for the index during its upcoming trading, especially if it breaks the support 34,690.25, to target the support level 34,000.
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