{"id":57589,"date":"2024-12-23T08:51:46","date_gmt":"2024-12-23T07:51:46","guid":{"rendered":"https:\/\/www.captrader.com\/?post_type=analyse&p=57589"},"modified":"2024-12-23T08:51:47","modified_gmt":"2024-12-23T07:51:47","slug":"dow-jones-forecast-analysis-dead-cat-bounce-or-trend-continuation","status":"publish","type":"analyse","link":"https:\/\/www.captrader.com\/en\/analyse\/dow-jones-prognose-analyse-dead-cat-bounce-oder-trendfortsetzung\/","title":{"rendered":"Dow Jones forecast & analysis: Dead-cat bounce or trend continuation?"},"content":{"rendered":"
The past trading week was characterized by strong sell-offs on the stock markets. The Dow Jones closed almost 1000 points or 2.25 % lower compared to the previous week. Downward pressure mainly arose on Wednesday evening after the Fed's press conference. After an initial moderate recovery attempt on Thursday, a significant rally followed on Friday.<\/p>\n\n\n\n
As expected, the Fed cut interest rates by a further 25 basis points on Wednesday evening. The reference interest rate is thus in a range of 4.25 - 4.5 percent. After September and November, this was the third interest rate cut this year.<\/p>\n\n\n\n
According to the CME Group's FedWatch tool, the probability of a rate cut was over 90 %, which is why this did not initially trigger a direct price reaction. There was a little more movement during and after Fed Chairman Jerome Powell's press conference.<\/p>\n\n\n\n
The Fed has signaled fewer interest rate cuts for the coming year than previously assumed. Instead of the four rate cuts forecast in September, only two are now expected. This adjustment reflects the robust US economy and the strong labor market on the one hand, while inflation expectations have been adjusted upwards on the other.<\/p>\n\n\n\n
For 2025, the Fed now expects an inflation rate of 2.5 %, which is higher than the previous estimate of 2.1 %. Core inflation, which excludes volatile components such as food and energy prices, is also forecast at 2.5 % for 2025, compared to 2.2 % in the September forecast.<\/p>\n\n\n\n
Short-term explosion in volatility<\/strong><\/h2>\n\n\n\n
The adjustment to the inflation forecast was met with a market environment that had previously priced in a very high level of optimism. This explains the briefly very volatile reaction on the stock markets. The four major US indices all came under significant pressure and fell by an average of 2.5 - 3 percent, with the Russell 2000 even closing almost 4.5 percent lower than the previous day.<\/p>\n\n\n\n
The VIX volatility index rose to a peak of 28.32 points, the second strongest percentage increase in its history. By Friday evening, however, the \"fear barometer\" was already back below the psychologically important 20-point mark and stood at 18.36 points.<\/p>\n\n\n\n
Longest losing streak in 50 years<\/strong><\/h2>\n\n\n\n
The Dow Jones had already shown clear signs of weakness a few days earlier. With ten consecutive days of losses, the index suffered its longest losing streak in 50 years. As you can see on the following daily chart, the Dow has broken out of the trend channel that has been in place since August. In addition, the EMA 50 (green) was broken to the downside and stabilization took place in the area of the EMA 100 (blue).<\/p>\n\n\n\nDow Jones Index daily chart<\/figcaption><\/figure>\n\n\n\n
<\/p>\n\n\n\n
It is also interesting to note that the correction ran exactly to the level of the closing price on November 5, the day before the US presidential elections. The \"Trump rally\" was thus neutralized and the gap was closed. <\/p>\n\n\n\n
This was followed by a rally on Friday with strong volumes. Ironically, the inflation data reported at 14:30 contributed significantly to the positive sentiment. The core monthly PCE rate came in at 0.1%, while the expectation was 0.2% and the previous reading was 0.3%. At 2.8%, the annual core PCE rate was also slightly below the forecast value. <\/p>\n\n\n\n
If the price falls below last week's short-term lows, the correction threatens to continue down to the 41,500 points area or to around 41,000 points, where the daily EMA 200 (red) is located. A recapture of the trend channel including the EMA 20 and 50, on the other hand, would brighten the technical picture considerably.<\/p>\n\n\n\n
The weekly chart shows that the long-term upward trend in the Dow Jones is still intact. Even the weekly EMA 20 was defended at the weekly closing price. The support levels of 41,500 points and 41,000 points mentioned above are also clearly visible on the weekly chart.<\/p>\n\n\n\nDow Jones weekly chart<\/figcaption><\/figure>\n\n\n\n
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