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The Dow Jones Quickly Collapses, But What Is Driving The Decline?

20

Stocks decline as investors trade cautiously as oil prices continue to rise for a fourth day triggering inflation concerns.
Strong economic data is causing investors to rethink the number of cuts in 2024. The latest ISM data indicate economic expansion for the first time since October 2022.
The US Dollar Index is attempting to renew its 2024 highs as investors remain bullish on the Dollar. Nevertheless, Gold holds onto gains.
The Dow Jones witnessed the strong bearish impulse wave from the main 3 US indices. The decline was largely a result of two companies: 3m Co and Home Depot.

USA30 – The Dow Jones Surprisingly Is Monday’s Worst Performing Index!

The USA30 ended the day 0.88% lower when taking into consideration the latest two market closes. Signals are largely pointing towards a sideways price movement with a slight bearish bias. Momentum indicators point towards a bearish trend including the 75-Bar EMA and the VWAP. Oscillators and price sentiment indications also indicate sellers are controlling the market. However, the bearish impulse wave seen yesterday is identical to price action from the 14th and 22nd of March. Hence why a sideways price movement is also possible. However, if the price declines by a further 0.30%, the pattern will be broken and sell signals will further strengthen.

The day started with a bullish price gap and the price increasing, but this quickly lost momentum after the ISM data. The ISM PMI read 50.3 for the manufacturing sector and 55.8 for manufacturing prices. The ISM Manufacturing Prices rose to its highest level since August 2022. Due to the better-than-expected data, investors are not so certain the Fed will cut on 3 occasions in 2024. Adding to the concerns is the higher oil prices which continue to rise. So far this week, oil prices have already risen 1.55%. If this applies upward pressure on inflation, the Fed may struggle to adjust its policy which is negative for stocks.

Analysts could easily identify the weakness for the Dow Jones as most components were depreciating. Of the 30 stocks, only 8 stocks rose in value and the stocks witnessing the highest volatility were declining. The worst performing stocks were 3m Co and Home Depot which make up more than 8.00% of the index. Of particular interest was 3m Co which fell more than 11.00%. In the after-hours trading, most stocks have continued to decline including the most influential stock, United Healthcare.

EURUSD – Institutions Fix Their Attention on the Expectedly High German CPI!

The EURUSD is witnessing a steady decline during this morning’s Asian session, but not yet seeing significant momentum. Nevertheless, indicators and price action are indicating a downward trend in favor of the US Dollar. This is largely due to predictions the European Central Bank may need to cut interest rates before the Federal Reserve do.

The price of the exchange continues to form “lower lows and lower highs” which form an official downward trend. The price also trades significantly lower than average price movements and in the “sell” zone of the RSI. For this reason, momentum indicators continue to point towards Dollar strength. However, traders should be slightly cautious that the price is only 0.34% higher than the previous significant support level.

The price this morning will largely depend on the German Preliminary Consumer Price Index which analysts expect to read 0.5%. This would be the highest monthly rise in 12 months. However, if the CPI does not read as high, the exchange rate and Euro in general can again decline further.

Michalis Efthymiou

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

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