The Dow Jones Index crashed below a crucial support level on Monday as the stock market dived as risks rose. It dropped to a low of $48,800, its lowest level since February 5, and nearly 4% below its all-time high. This article explores why the DJI Index is slumping and why it may have more downside to go.
Top Reasons Why the Dow Jones Index is Slumping Today
There are four main reasons why the Dow Jones Index is slumping this week. First, there is the ongoing confusion around Donald Trump’s tariffs. The Supreme Court ruled against his tariffs on Friday, pushing him to announce new ones using an existing limited law.
Therefore, there is an uncertainty about the tariffs that the US will levy against other countries and the impact on American companies, including those in the Dow Jones.
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Second, the index is falling as investors wait for Trump’s final decision on striking Iran. Odds of an attack happening in the coming weeks have soared on Polymarket. Also, Trump has given Iran a few days to reach a comprehensive deal.
A new war in the Middle East would have major impacts, including soaring crude oil prices and supply chain disruptions. It would also lead to more volatility in the financial market.
Third, market participants are positioning themselves to the coming NVIDIA earnings, which will come out on Wednesday. These results matter to the Dow Jones since it is the biggest constituent company in the Index. Also, NVIDIA’s results will provide more color on the health of the artificial intelligence (AI) industry.
The index is also slumping as fears that some constituent companies like Microsoft, IBM, and Salesforce will be disrupted by the AI technology. This explains why the IBM stock price tumbled by over 10% on Monday, its worst daily performance in decades.
There are also concerns about the private credit industry, where stocks like Blue Owl, Ares, and KKR have tumbled in the past few weeks.
DJI Index Technical Analysis
Technicals also explain why the Dow Jones Index has slumped this week. A closer look shows that it formed a rising wedge pattern, which is made up of two rising and converging trendlines. This pattern often leads to more downside over time.
The index also retreated after forming a bearish divergence pattern. This pattern normally forms when the key oscillators, like the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) retreat as an asset is rising.
Therefore, the most likely scenario is where the index continues falling since it has now moved below the 50-day moving average and the lower side of the wedge pattern. This retreat may see it drop to the key support level at $48,000.
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