The Dow Jones Index is nearing a correction after falling by 9% from its highest point this year.
It tumbled by 768 points on Wednesday, and its futures dropped by over 120 points.
This retreat may continue in the coming weeks, potentially to $45,000 as risks rise.
Dow Jones Index technical analysis suggests more downside
The daily chart reveals that the Dow Jones Index has crashed in the past few weeks, falling from the year-to-date high of $50,530 to the current $46,040.
This chart shows that the index has dropped below the 50-day and 200-day Exponential Moving Averages (EMA). Moving below that level will is a sign that bears have prevailed.
The index has also crashed below the Ichimoku cloud indicator, while the Supertrend indicator has turned from green to red.
At the same time, the index has dropped below the 23.6% Fibonacci Retracement level.
This retreat happened after Index formed a rising wedge pattern, which is made up of two ascending and converging trendlines.
Meanwhile, the Average Directional Index (ADX) has jumped to 31, its highest level since October last year.
A surge in the ADX indicator is a sign that the downtrend is gaining momentum.
Therefore, the index will likely continue falling, with the next key target being at the 50% Fibonacci Retracement level at $43,615, down 5.60% from the current level.
Dow Jones Index chart | Source: TradingView
American stocks are facing major risks
The Dow Jones Index has slumped in the past few weeks as investors have embraced a risk-off sentiment.
A good example of this is shown by the Fear and Greed Index, which has plunged to the extreme fear zone of 17.
Most sub-indices in the Fear and Greed Index have moved to the extreme fear zone, with only the market volatility or VIX being in the neutral zone.
These risks continued rising as the US-Iran war shifted to the energy market, with Brent, the top global benchmark, jumping to $116, and the West Texas Intermediate (WTI) rose to $96. Natural gas prices have soared.
Therefore, there is a risk that the US will face higher inflation for longer.
The most recent results showed that the headline and core Producer Price Index (PPI) jumped in February, a trend that may continue in the foreseeable future.
Consumer inflation will likely continue rising, leading to a more hawkish Federal Reserve.
This explains why US bond yields continued rising, with the ten-year and 30-year rising to 4.277% and 4.90%, respectively.
Some analysts now believe that the Federal Reserve will deliver two rate hikes this year.
Most companies in the Dow Jones Index have plunged in the past 30 days as the war has accelerated.
For example, data compiled by TradingView shows that Dow stock has dropped by 17% in the last 30 days.
Sherwin-Williams stock has dropped by 16.5%, while companies like Home Depot, Boeing, American Express, Nike, Goldman Sachs, and Caterpillar have all plunged by over 9.5% in the same period.
On the other hand, just a handful of companies have jumped in the last 30 days.
Chevron, Amazon, Cisco, and Salesforce stocks have risen by over 1%.
The post Dow risks crash to $43k as Fear and Greed Index tumbles appeared first on Invezz
