- The Dow Jones rises after SNAP slams the technology sector.
- Consumer strength is one of the factors that contributed fully to the recent rise in the stock market.
- At least until the end of Q2, there are no positive signs for a trend reversal to occur, at least until the end of Q2.
NEW YORK, May 25 (FintechZoom): The Dow Jones closed higher despite a spate of negative economic data. Tech stocks slumped (the worst performers were Apple, Disney, and Boeing) on worrying guidance updates. However, this condition was helped by three stocks worth watching after they showed bullish indications, namely stocks from Pfizer, Royalty Trust, and SM Energy, which all showed their relative strength to reach new highs.
The series of worse-than-feared economic data fueled fears that a recession was imminent. According to Econoday, the Composite Purchasing Managers’ Index came in below economists’ forecasts. The flash composite index for May was 53.8, down from 56.0 in April and below the consensus forecast of 55.5.
The Richmond Fed Manufacturing Activity Report was also poor, well below the most pessimistic forecast. It fell to -9 in May, from 14 in April, the lowest reading since May 2020. Two of the three parts of the index are bad, and the only good thing is a slight improvement in supply chain problems. Even though the US economy appears not to be in disarray, its weakness is far worse than many had expected.
Even though the economy doesn’t seem to be getting better, the Dow Jones Industrial Average was able to fight back and end the day with a slight gain. It ended the day up about 200 points or 0.2%. The possibility of continuing the resistance today is still very likely. At least some strengthening above 200 points can still occur.
Are you ready for today’s trading day? Technically, it could happen any time now. The Dow Jones is starting to look a little better, but the market is clearly not feeling a strong rally yet. This is because stocks that have the potential to lift the index in a positive direction are still in the consolidation stage. Indeed, a reversal can not happen instantly as long as the shadows of a recession are still haunting. The combination of rising costs and weak demand is a profit margin killer.
At some point, deteriorating economic conditions could spur the Federal Reserve to slow the pace of rate hikes, but perhaps not until at least a 50 basis point move in June and July.
Dow Jones technical analysis:
In general, the Dow Jones has experienced some sideways range in the last 2 days. Although it closed with positive gains. However, the threat of a bearish trend still looms large. We can see that the last price movement started with a lower score but was able to provide resistance until it ended positively within the latest resistance zone, at 31928. There are plenty of opportunities to break the weak resistance area. At least it can touch the higher trendline at 32100 or even retest the supply zone.
If these key positions still can’t be broken through, the bearish trend will have a chance to continue. At least try to touch on new support in the 31,400 area, or if conditions worsen, it can be recommended to reach strong support in March 2021.
There are no positive signs for a trend reversal to occur, at least until the end of Q2.
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