On the four-hour chart, the wave pattern of the Dow Jones Industrial Average looks quite convincing. The current wave pattern assumes that the entire upward section of the trend has taken on an impulsive five-wave form and is already done. It is clear that any wave marking at any time may require adjustments, and the news background can affect any outlook. Nevertheless, it is currently believed that the upward trend has already completed its construction. If so, we can expect the formation of at least a three-wave descending structure. Yesterday, the index lost 473 points, or 1.36%, which was one of the largest declines in the past few months. However, everyone already knows that many stock indices are overly inflated at this time, since the US authorities have been providing the economy with trillions of aid packages for more than a year. Naturally, this money is partially deposited in the stock market. It is fair to note that each period of growth is followed by a period of decline, which is what one currently expects.
On Tuesday, all major US stock market indices closed lower. It was already mentioned that the Dow Jones Industrial Average lost 473 points, or 1.36%, the S&P 500 lost 36 points, or 0.87%, while the Nasdaq Composite also did so by 12 points, or 0.09%. According to analysts, markets are most interested in American inflation and its prospects, noting that the flow of capital between the markets will depend on this. Accordingly, investors will look for the most profitable markets, since the profitability of many stocks will simply be unprofitable if inflation further increases. However, Fed representatives are not going to panic about the fact that March inflation rose to 2.6% y/y, and may rise to 3.6% y/y by the end of April. This report will be released today.
Chicago Fed President, Charles Evans, said yesterday that US inflation and employment rates are still far from the Fed's targets. He noted that the real assessment of inflation and employment should be based on the long-term period, and not on short-term growth. Analysts also note that shares of many technology companies that suffered losses on Monday closed in the positive area on Tuesday. However, this does not apply to the most well-known companies. Apple shares opened much lower than the closing price on Monday, although they rose at the end of trading on Tuesday. Therefore, this is still negative. At the same time, Tesla shares closed at $ 628 on Monday, opened at $ 587 on Tuesday, and closed the day at $616, giving us another negativity.
Based on the conducted wave analysis, a downward wave, which will be the first in the composition of at least a three-wave downward pattern, is expected to form. A successful attempt to break through the level of 34019, which corresponds to 23.6% Fibonacci, will indicate the readiness of the index to continue to decline with targets set around the calculated marks 33340 and 32801, equivalent to 38.2% and 50.0% Fibonacci. Thus, it is suggested to sell the #INDU instrument for each MACD downward signal.
