The Dow Jones Index (INDEXDJX: .DJI) opened lower on Wednesday despite markets anticipating Fed interest rate cuts. Traders likely opted to take a cautious stand as debate rages on whether the Fed will slash rates by 25 bps or 50 bps. The Index was at 41,584, easing by a minuscule -0.05 percent on the daily chart at the time of writing, and down by -0.5 percent from the all-time highs recorded on Tuesday.
Majority of traders expect 50 points cut as per CME FedWatch tool, which shows that the figure has risen from 14 percent to 64 percent in just a week. The downside to that is most positions in the market could have already locked in the bigger rate cut. Furthermore, the events of August 5 already pointed to potential underlying FUD sentiment. That could result in marginal gains after the Fed announcement, or even a correction.
The five largest stocks in the Dow Jones Index signaled weakness in pre-market trading, underlining the neutral-to-bearish view. United Health was virtually unchanged at +0.06%, Goldman Sachs was at -0.3% while Microsoft was at -0.5%. In addition, Caterpillar was down by -0.04% and Home Depot was down by -0.3 %. These will likely set the stage for market-wide declines when markets open in a short while.
The Dow Jones Index could experience increased volatility as traders react to the Fed’s announcement, but the downside will likely prevail if resistance persists at 41,662. That could precipitate a downward movement to the first support at 41,471. However, extended bearishness could strengthen the decline to break below that mark and test 41.335.
Alternatively, moving above 41,662 will signal the onset of bullish control. In that case, the first resistance could come at 41,792. However, if the buyers hold on to control for longer, the index could break above that level, invalidating the downside narrative and potentially testing 41,940.
This post was last modified on Sep 18, 2024, 15:43 BST 15:43