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Abstract: During Tuesday's trading session, the stock market was mostly lower and fell after Monday's close was mostly higher. Major stock indexes all fell, with the Dow losing the most.

Fundamentals

The Dow Jones Industrial Average and the S&P 500 fell to new lows before the close. The Dow Jones fell 336.46 points, or 1.0%, to 33,012.14, the S&P 500 fell 26.38 points, or 0.6%, to 4,109.90, and the Nasdaq fell 22.16 points, or 0.2%, to 12,343.05.

The sharp drop in the Dow Jones index was triggered in part by the decline in Home Depot's share price. Home Depot's shares fell after it reported lower-than-expected first-quarter revenue and lowered its full-year performance guidelines. This home improvement retailer fell 2.2% at the close.

At the same time, significant declines in Dow components Nike, 3M, and Amgen also put pressure on the blue-chip index.

As the talks between President Biden and Republican Speaker of the House of Representatives McCarthy drew to a close, persistent worries about the U.S. debt ceiling also generated some negative emotions. While Biden is calling for a "clean" bill to raise the debt ceiling, Republicans are pushing for spending cuts and job demands for a social safety net.

Although the two sides are far apart, everyone knows the disastrous consequences of an eventual U.S. default. Speaker of the House of Representatives McCarthy hinted that an agreement may be reached within a few days. He said it was possible to reach an agreement by the end of the week, warning that much remained to be done.

According to market observation, the risk of economic recession has restrained the prospect of a rise in U.S. stocks this year, and the deadlock in the U.S. debt ceiling is another unfavorable factor that has led to a decline in the stock market. At present, the pricing of the stock market continues to reflect the soft landing of the economy and is out of touch with the bond market. The lack of progress in the U.S. debt ceiling talks is another reason investors are avoiding U.S. stocks, as a sell-off could occur if the debt ceiling problem continues to the last minute.

However, looking back at the last minute of all previous U.S. debt ceiling deadlocks, this debt ceiling maturity is another farce without exception. The debt ceiling does not trigger a debt default, which means both sides will compromise at the last minute of the game. Because there is no limit to money and debt, those who decide where to spend and how much to spend will not consider how much they have to spend, and then prioritize where they should spend their money.

Technical Analysis

Since hitting a high of 34,628 on December 1, 2022, the Dow Jones Industrial Average has begun to evolve into the major "wedge-extended" range configuration shown in the 1D timeframe. In the short term, there is no obvious sign of upward momentum as its price movements are limited below the 20-day SMA.

Within the smaller 4H timeframe, the Dow Jones Industrial Average has so far failed to make any progress above its slightly downward-sloping 20 SMA, and prices have now continued to fall near 33245 (currently as resistance) since recently falling below the 20 SMA. In addition, the 1H relative strength index has been lower than the corresponding downward resistance level.

These observations indicate that the short-term downward momentum has not slowed down. A break below the secondary support level of 33100 could be a further extension of the price to 32950.

On the other hand, if it closes above the key short-term resistance level of 33580 in the hourly timeframe, the bearish tone will be rejected, and the next upward resistance level will be near 33750.

However, as we said, the maturity of the debt ceiling is another farce without exception. All parties will compromise at the last minute of the game. To this end, I continue to be optimistic about the upward adjustment of this index. It is recommended to buy the dips.

Trading Recommendations

Trading direction: Long

Entry price: 33012

Target price: 33500

Stop loss: 32750

Deadline: 2022-05-31 23:55:00

Support: 32988, 32926, 32818

Resistance: 33250, 33362, 33540