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Abstract: U.S. stocks were mostly lower in overall trading on Tuesday after the opening trend came under pressure. At the end of the day's trading, major stock indexes all fell.

Fundamentals

The tech-heavy Nasdaq ended the day's trading down 77.36 points, or 0.6%, to 12,179.55, while the S&P 500 fell 18.95 points, or 0.5%, to 4,119.17. The Dow Jones ended the day hovering in the rising zone, but still closed down 56.88 points, or 0.2 percent, to 33,561.81.

Wall Street's weakness may be reflected in concerns about the debt ceiling before the meeting between President Biden and House Speaker McCarthy. McCarthy called for any agreement on raising the debt ceiling, including spending cuts, and did not favor short-term solutions. However, the overall trading activity of U.S. stocks remained relatively sluggish on Tuesday, as the lack of major U.S. economic data kept investors on the sidelines.

Meanwhile, continued worries about the global economic outlook spread to Wall Street early on Tuesday after disappointing trade data from China.

The April Consumer and Producer Price Inflation Report, due to be released on Wednesday and Thursday respectively, could have a significant impact on interest rate prospects, causing investors to keep pulling money out of relatively risky assets such as stocks.

Before the U.S. consumer report in April, CME Group's FedWatch tool now showed a 76.5% chance that the Federal Reserve will keep interest rates unchanged at its next meeting in June. After raising interest rates last week, Federal Reserve Chairman Powell said the central bank would adopt a "data-dependent approach" to future monetary policy decisions.

In fact, the April CPI report will remind everyone that inflation will remain sticky, and the Federal Reserve will not raise interest rates because of one report, but it will justify the argument that interest rates will remain high for longer.

U.S. stocks have historically benefited from the Federal Reserve's suspension of interest rate hikes, but given the current environment, history may not repeat itself.

The market currently believes that the Federal Reserve will not raise interest rates or cut interest rates further for the rest of this year. In market terms, the Federal Reserve is now "suspending its actions".

In the successive interest rate increase cycles of 1985, 1995, 1997, 2006, and 2018, once the Federal Reserve has completed raising interest rates, the purchase of shares will yield good returns over the next 6 to 12 months. This result is very intuitive. If the Federal Reserve does not raise interest rates and tightens its policy aggressively, the challenge to the stock market will be one less.

The current data show that compared with the historical situation when the Federal Reserve last raised interest rates as a buying opportunity, inflation has increased, and the economic slowdown has been even greater. For these reasons, we are concerned about the idea of confusing the current situation with previous examples.

Technical Analysis

After rebounding from 32948 support and a 50-day SMA, the Dow Jones Industrial Average (DJIA) was again under pressure in Tuesday's trading.

The DJIA has been consolidating since early April and the technical oscillator reflects the latest price movements. The RSI has leveled off above the level of 50 and the MACD is falling below its positive zone with an intention to fall further.

If the DJIA can strengthen its positive momentum, the next resistance level will test the downward sloping pressure line at 33800 level, and breaking through the resistance line will hopefully push up prices again to confirm the upward structure in the medium- and long-term time frame. But all this presupposes that prices cannot fall below the previous low of 32948.

On the other hand, if the price fails to break above this upside resistance line in the next few sessions, the risk will turn back to the downside. If it breaks below the previous low of 32948, the price will again fall into medium-term fluctuating trading.

Overall, the DJIA is neutral in the short term, and it is recommended to remain cautiously bullish for the medium- and long-term outlook, while buying the dips.

Trading Recommendations

Trading direction: Long

Entry price: 33200

Target price: 34090

Stop loss: 32680

Deadline: 2022-05-24 23:55:00

Support: 32984, 32767, 32557

Resistance: 33757, 33800, 34085