Dow Jones Hits a 6-Day Losing Run on US Data, Fedspeak

Summary:
• The comments by St. Louis Fed President James Bullard and upbeat US data lead to another day of selling on the Dow Jones index.

The Dow Jones Industrial Average has made it six consecutive losing sessions after ending the Tuesday trading session 92 points off the pace. The 0.31% decline takes the Dow Jones index to new 2022 lows after US data allowed the US Dollar to pick up strength later in the New York session. 

US Consumer Confidence beat expectations remarkably, coming in at 108.0 (versus 104.0 consensus and 103.2 previous numbers). New home sales also showed an unexpected rise, growing from 511K in July to 685K in August (consensus was 500K).

The data shows that the radical rate hikes embarked on by the US Federal Reserve a few months ago have not yet produced a recessionary impact on the housing sector and consumer sentiment/spending. This will add to the narrative of the Fed Reserve still hiking rates in the last two meetings of the year. 

The bearish sentiment on the Dow Jones index was further solidified by comments from St. Louis Fed President James Bullard. Bullard, a notable hawk within the Federal Reserve Board, hinted that the US had a severe inflation problem and that the US apex bank risked credibility if it eased its inflation targets.

Reuters quoted Bullard in a London event as saying that the situation meant the Fed would have to take a “higher for longer” approach to interest rates. Long-term US Treasuries reacted by climbing 0.53% to 3.947%. 

Dow Jones Index Forecast

The 28969 support level (12 November 2020 low) remains vulnerable after the intraday challenge. A breakdown of this area gives the bears clear space to aim for the underlying support at 28184 (11 August 2020 low and 20 October 2020 high).

A further decline brings in 27373 (3 December 2019 and 2 October 2020 lows). Further price deterioration brings in the site of lows seen on 24 July 2020/29 October 2020 at 26403, with the 10 July 2020 low at 25461 also coming into the mix as an additional harvest point if the decline continues. 

This outlook is only negated if the bulls protect the 28969 support and apply a forceful bounce that overwhelms bearish pressure at 29670 (22 June and 22 September 2022 lows). Clearance of this barrier makes the 30100 resistance level available as a new target.

The 24 June/15 July 2022 lows at 30627 become the new target to the north if the bulls uncap the barrier at 30100. Additional northbound targets are found at the 31282 (12 May low) and 31733 resistance levels (22 July and 30 August lows). 

Dow: Daily Chart