Dow Jones Forecast: Dow Jones Technical Index Saves Itself from Early Losses.
- On Monday, a 375-point Dow Jones Industrial Average rally represented a rebound from last week’s steep losses.
- The Dow Jones surges on signs of recovery; VMware gains due to Broadcom talks.
- The Dow Jones Industrial Average rose 1.2% in Monday’s opening session, and the S&P 500 rose 1.1%. The tech-heavy Nasdaq gained 0.9%.
In its recent intraday trading, the Dow Jones Industrial Average closed with a slight gain of 0.03%, adding about 8.77 points. At the end of trading, the stock settled at 31,261.91. Trading on the previous day saw the stock fall by -0.75% to end at 31,261.91, 30,635.76. During the past week, the index declined by -2.95% for the eighth consecutive week, the longest losing streak since 1932.
Early Monday, VMware’s (VMW) stock increased 18%, following Bloomberg’s report that Broadcom (AVGO) is in talks to acquire the cloud services provider. The stock of Broadcom subsequently declined 4%.
After closing Friday at 2.78%, the 10-year Treasury yield ticked up to 2.82% on Monday morning. Treasury yields ended the week at their lowest level since April 26 after suffering a second week of losses. Among US crude prices, West Texas Intermediate crude traded at $111 a barrel, up less than 1%.
One exchange-traded fund rose by 0.9%, tracking the Nasdaq 100 index, Invesco QQQ Trust (QQQ). SPY, the SPDR S & P 500 ETF, rose 1.1%.
The index rose in 16 of its 30 components, with Cisco Systems Inc. reporting the highest percentage gain of 2.92% on the index, followed by Salesforce Inc. by 2.60%, and McDonald’s Corp. by 21.14%.
According to IBD MarketSmith chart analysis, Dow Jones leader and energy giant Chevron maintains a flat base with a 174.86 buy point. The stock recovered Friday near its 50-day moving average. Shares of CVX rose 1.3% Monday.
With its decision to reduce interest rates on five-year loans, the People’s Bank of China hopes to boost weak housing sales by cutting mortgage costs. The news supports stocks after they were battered by selling all week due to shutdowns in industrial centers like Shanghai linked to the fight against the virus. Weak data on US factory and consumer activity contributed to the outbreak of the new coronavirus in April.
Dow Jones technical analysis:
As a technical indicator, the index trades within the range of a descending channel that restricts its short-term trading. In the attached chart, we see the price continues to trade below the simple moving average for the previous 50 days (daily), at a time when negative pressure is continuing. These signals are in addition to the influx of negative signals with the relative strength indicators, which have remained stable in oversold regions. Although sharp selling continues on the index, we see the index trying to drain some of this saturation during the last week, which confirms the control of the selling forces.
We are therefore developing negative expectations about the index. Our expectations are for the index to continue to decline during its upcoming trading and target the first support level at 30,547.50 during its stability below the 32,000 resistance level.
