Dow Jones Forecast (New York, May 20): Tech Giants Leading the Losses
- Further downside pressure will likely continue with the bears aiming for 29987 as their next target.
- European and Asian indexes ended mainly in the red, although off their intraday lows.
- Dow Jones Industrial Average ended in the red, but other US indexes ended mixed.
Friday’s open saw the Dow Jones Industrial Average rise 0.5%. However, the index could not sustain the gains and fell around 1.7% at the time of writing. Technology stocks led the way, with the Nasdaq advancing 1.2%. On Thursday, the yield on the 10-year Treasury note ended at 2.85%. On Friday, it increased to 2.87%. After falling seven of the last nine trading days, the 10-year Treasury yield remains below its 52-week high of 3.16%.
A central bank cut in China’s key interest rate overnight supported the struggling economy, sending the Dow Jones Industrial Average higher Friday. Early trade was dominated by companies with intense China exposure, such as Microsoft (MSFT), Apple (AAPL) and Nike (NKE). However, following disappointing first-quarter revenue and earnings results, Ross Stores (ROST) sank after unveiling weak guidance.
According to IBD MarketSmith’s chart analysis, Dow Jones’s leading index continues to build a flat base with a 174.86 buy point. On Friday, CVX shares traded up 1.1% after stabilizing at their 50-day line.
As Dow Jones and IBD SwingTrader stock Merck eases lower Friday, it remains above a cup and handle’s buy zone. As of Friday morning, the 5% buy area is at 94.06. In addition, this stock’s relative strength line has hit new highs during the current stock market correction, indicating stock market outperformance.
Apple shares declined another 2.5%, the most among Dow Jones stocks. Stocks are about 25% below their 52-week highs and far below their long-term 200-day line. Apple shares moved up 1.4% Friday.
Dow Jones technical analysis
The daily swing chart indicates the primary trend is down. The break of 30955 will signal the resumption of the downtrend. Once 32692 is broken, the primary trend will be upwards. There are a total of 32692 to 30955 minors in this range. Its pivot level, or 50% level, is 31824. This range is between 34027 and 30955. A key support area lies between 32491 and 32853, its retracement zone.
Bears are expected to continue to lower the market, with their next target being March 4, 2021’s bottom at 29987. Friday’s premarket session is targeted for 31824 as the nearest upside target. On a test of that level, sellers are likely to enter due to the primary trend being down. This market is dominated by strong sellers, as we saw earlier this week. The trend will switch until the pattern is broken and they sell off.
It won’t surprise them if they either pound the market lower through Thursday’s low price of 2955. If bad news comes in, too, don’t be surprised. The buyers wait until the market reaches a previous value area before taking action because there is no upward momentum in the market. Investors should be aware of the nearest value of 2987.
