DOW tumbled sharply overnight, shedding -530 points or -1.35%, marking its most pronounced session drop since March 2023 and its fourth consecutive day of losses. This sharp decline seems a natural reaction after the index’s robust bullish run since last November, which propelled it to new record highs, lost steam. It’s also a logical area for some profit-taking and consolidations, just ahead of 40k psychological level.
The strong rally was largely fueled by anticipations of forthcoming interest rate cuts, even with delays. Nevertheless, there is little, but growing skepticism among investors on whether the policy easing cycle would really start this year. The recent surge in commodity prices has also served as a stark reminder of the challenges in curbing inflation.
The selloff also come just ahead of the crucial non-farm payroll report from the US today. Markets are expecting 205k job growth in March. Unemployment rate is expected to be unchanged at 3.9% while average hourly earnings are expected to rise 0.3% mom. Any upside surprises in today’s report, in particular wages growth, could prompt further shift in Fed expectations, and hut overall risk sentiment in the stock markets.
Technically, considering bearish divergence condition in D MACD, 39899.05 could be a medium term top in DOW already, just ahead of 40k psychological level, and 61.8% projection of 18213.65 to 35962.65 from 28660.94 at 40241.64.
Decisive break of 38483.23 support should confirm this bearish case, and bring deeper correction back to 38.2% retracement of 32327.20 to 39889.05 at 37000.42.
Nevertheless, strong rebound from the current level would push DOW for another take on 40k before topping.
