Last week was quite a choppy week in US indices with huge movements to the up and downside within the Tech and Industrial sectors. We saw the Dow Jones (US30) create new all time highs as well as NASDAQ making a recovery after having quite the selloff in the week prior. We saw VIX, also known as the fear gauge, make a quick decline over last week showing us a potential recovery in risk trends with bond yield volatility eventually slowing down. Not to mention Congress managing to cement President Biden’s $1.9 trillion stimulus package which likely added to investor optimism.
Fundamentally this week, on Tuesday we have both Retail Sales coming out which will bring some volume to the markets. Wednesday is a big day with Crude Oil inventories coming out which could continue to influence the Industrial Index as it has in the past few weeks with Oil stocks going on a bull run. We also have the FED Interest Rate Decision as well as a press conference by Fed Chair Jerome Powell which will be closely eyed by investors, who are looking for clues about the Fed tapering plan and the central bank’s view on rising longer-term yields. Jobless claims on Friday will most likely add or take away from investor optimism depending on how the figure comes out.
We can see NAS found dynamic support from the long term trendline originating from swing lows from June and November 2021. Technically, NAS is at an inflection point with a break or bounce situation. It could still be susceptible to further selling off with it not showing a complete pullback just yet and with bond yields not entirely stabilised, tech stocks are still first in line for profit taking among institutions. Price is currently hovering around the 50-Day Exponential Moving Average, potential Fibonacci retracement zones as well as a previous level of resistance coming from January 2021. If price manages to break and clear these technical levels, we will most likely see new highs created in the weeks to come with the help of stimulus cheques being sent out as early as this weekend potentially, some already receiving their $1400 boost.
Looking at the Dow Jones on the 4 Hour timeframe, we can see that price went on a rocket ship amidst the news of Congress managing to pass President Biden’s stimulus package resulting in a boost in investor confidence. Technically, price has not had any form of a real pullback and with it being as bullish as it is at the time of writing, profit taking is bound to take place eventually. Once this happens, the first levels of potential support where price could stall is around the $32 600 and $32 400 regions respectively. If no support is found, the psychological level of $32 000 will become the main target.
With all these fundamental factors to take into account, be mindful of risk management as we anticipate another volatile week in the stock market. To stay up to date and receive more market outlooks like the one above, subscribe to our blog for updates directly to your mail. Have a great trading week ahead!