Wall Street is recovering from fears of the rise in inflation in the US. One of the key stock indices, the Dow Jones Industrial Average, #INDU, grew 0.68%% in the American session on Friday after a volatile week.
The Dow Jones is trading above the 21 SMA and above the 200 EMA, showing a bullish signal in the near term, as recent reports dispelled investors' fears about inflation. Yesterday in our analysis, we pointed out this upward movement. We invite you to read our article.
The strong volatility of Wall Street and stocks was explained by Giles Coghlan, HYCM's chief currency analyst when he said: It all has to do with inflation and an eventual rise in interest rates, he added. Fear in the market depends on these increases (in prices and financing costs).
Undoubtedly, the stock market is very sensitive to inflation and strength and weakness of the US dollar, which has a negative correlation of 70%. Strength of the dollar puts pressure on the Dow Jones index and others.
Looking at the 4-hour chart of the Dow Jones, we can see the formation of a symmetrical triangle, just below the bearish channel line. On condition of a sharp break above this level, there could be an upward momentum to the zone of 34,375 and 34,760.
Dynamic supports combined with the 21 SMA and 200 EMA, as a strong bottom at the 34,000 psychological level, a technical bounce in this zone will be a good opportunity to buy with targets at 34,765 in the short term.
A daily close and consolidation below the 200 EMA located at 34,000 the outlook may be negative for the Dow Jones and there could be a drop to the 2/8 murray support located at 33,593.
The technical reading of the eagle indicator is showing a bullish signal, so we must wait for the break of the symmetrical triangle to be able to buy.
Support and Resistance Levels for May 21 – 24, 2021
Resistance (3) 34,525
Resistance (2) 34,350
Resistance (1) 34,269
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Support (1) 33,924
Support (2) 33,688
Support (3) 33,595