The US equities market closed lower last week as inflationary data came in higher than expected sending treasury yields higher. The Dow Jones, S&P500 and NASDAQ closed at -1.14%, -1.39% and -2.34% respectively as they managed to recover for most of Friday on the back of Retail Sales coming out lower than expected which seemed to cool Fed tapering fears and sent equities higher into the close of the week.
In terms of event risk for the week ahead, traders will be keeping their eyes peeled for Wednesday’s FOMC Meeting Minutes as they look to gain more insight regarding inflationary fears. Rapidly rising wages and prices are indicating a constraint on economic recovery which in turn weighs on consumer confidence within the markets. Thursday also brings us Initial Jobless Claims which always give us an idea of how the recovery of the job market is going.
Looking at NASDAQ on the Daily timeframe, price managed to find a form of dynamic support on the ascending trendline stemming from November and March swing lows respectively before managing to close above the low printed in April. This could either be on the back of Retail Sales coming in lower than expected on Friday or simply retail traders adopting the “Buy the Dip” mentality.
From a 4 Hour perspective, NASDAQ is currently bearish printing Lower Lows and Lower Highs with a potential inflection zone around the $13 600 region. At the time of writing, price is approaching our descending trendline in line with the 78.6 Fibonacci retracement level as well as a previous zone of resistance stemming from January. The last point of call for a potential bearish continuation would be the Aspire Profit Pocket (88/93 Fib region). A break and closure above $13 850 would invalidate any short setups and could open up room for NAS to make new highs should it play out.
With regards to the Dow, price eventually collapsed last week after the Dow made a new All Time High around the $35 100 region. We’ve seen a slight recovery in price on the back of the retail sales data easing tapering fears as previously mentioned. At the time of writing, price is trading around the 61.8% fib level and reaching a potential zone of support to take it higher. Traders will be eyeing deeper fib retracement levels for better a better risk to reward on short positions. Wednesday’s FOMC Meeting Minutes could also act as a potential catalyst as we wait for the Dow to find a true direction.
Traders will be eyeing the $4200 region on the S&P as we look to see if the previous ATH will hold as resisitance in line with the Aspire Profit Pocket to take price lower. A break and close above the previous ATH could indicate buying pressure is still present and would invalidate any short positions for the time being.
As always traders, we hope you have a fantastic trading week ahead & always exercise healthy risk management. For more updates like the one above, subscribe to our blog for instant updates to your email.