Dow Jones defends 200-day average
20 January 2022
Sentiment in US equities has deteriorated notably, sending US equity benchmarks sharply lower.
Both the Nasdaq and Dow Jones indices fell to their respective 200-day moving averages, but they have defended them so far. The long-term uptrend remains valid as long as indices remain above their 200DMAs.
So far, the reporting season has been a little bit rocky, with investors monitoring commentary from companies about price and wage pressures. The dip-buying strategy remains in play, although soaring US yields could undermine that strategy.
From other news, US initial jobless claims worsened sharply to 286,000, up from the last week's 231,000. Continuing claims also rose and printed 1.635 million, against 1.551 million a week ago.
On the other hand, the Philadelphia Fed manufacturing survey improved more than expected in January, rising to 23.2 from 15.4 in December.
For the Dow, the 200-day moving average is right around the 35,000 USD level (green line). If the index closes below it on a daily basis, larger stop-losses could be hit, likely sending the Dow further lower toward 34,700 USD, with the following target for bears at 34,000 USD.
Alternatively, the resistance will likely be at the 50-day moving average, currently near 35,700 USD (the purple line). As long as bond yields continue in their uptrend, stocks could remain pressured.