The Dow Jones Industrial Average jumped, rising in its recent trading at the intraday levels to achieve sharp gains in Wednesday's trading by 1.65%. This added 564.69 points, and settled at the end of trading at the level of 34,725.48, after its decline in Thursday's session by -0.02% . During the past week, the index achieved a gain of 1.34%, after it succeeded in compensating for its losses that came at the beginning of this week.
Economic reports showed US consumer spending fell 0.6% in December, amid a wave of cases of the highly contagious omicron mutant from the COVID-19 virus.
Meanwhile, the Fed's preferred measure of US inflation rose 5.8% in 2021 after another increase in December. Staffing costs rose 1% in the fourth quarter. While the consumer sentiment reading fell to its lowest level in 10 years as inflation fears escalated, confirming the decline in appetite for assets seen as risky.
The slowdown in consumer spending during December saw a sharp decline in personal spending levels, while the latest Michigan sentiment figures showed that US consumers were more concerned about inflation than at any time in the past 10 years.
The data come after the Federal Reserve's meeting last week that resulted in no change in interest rates, but Chairman Jerome Powell did not rule out a possible rate increase at every meeting this year, and said the central bank needs to be "smart".
Technically, the index, with its recent rise, is trying to compensate for part of what it incurred from previous losses, and at the same time tries to drain some of its clear over-soldness with the relative strength indicators, especially with the start of positive signals from them.
This is due to the dominance of a bearish corrective wave in the short term, with the index affected by its breach of a major ascending trend line. This is shown in the attached chart for a (daily) period, and also suffering from negative pressure due to its trading below the simple moving average for the previous 50 days.
Therefore, our expectations suggest a return of the stocks' decline during its upcoming trading, if the main resistance 35,000 remains intact, to target the pivotal support level 33,833.30.
