The Dow Jones, NASDAQ and S&P500 closed the week out at +0.3%, +0.76% and +1.13% respectively. Delta variant or Summer Doldrums?
Investors are anticipating a strong earnings season on the back of positive recent economic data releases. This in turn boosted market sentiment which sent the US 10 Year Treasury Yields lower last week. Yields dropped from the 1.4% region down into the 1.3% region before retracing slightly on Friday. This drop reflects that reflation hopes are on and there is a reduced demand for safety within the market (Yields are normally considered a “safer” investment than the stock market). Although the Covid 19 Delta variant has provided a slight speedbump in vaccine rollouts and new cases, economic recovery seems to be gaining pace. According to Factset, more blue chip companies are reporting a positive EPS (Earnings Per Share) guidance which is pointing towards the predicted strong earnings season.
In terms of risk events this week, Tuesday brings us the CPI release. This is one of the favoured data points used to gauge inflation. This week’s main event will be Wednesday and Thursday as Jerome Powell will be delivering his Fed speech. As usual, Initial Jobless Claims as well as Retail Sales on Thursday and Friday will bring some volume and movement to the market.
Technically, the Dow Jones has been ranging leading up to earnings season. Over the past few weeks, we’ve seen the Dow Jones form a Triple Top formation as price has not managed to break and clear the $34 900 handle showing sellers could be slowly taking control. This in turn could lead to downside in price in the week to come with targets being around the $34 150 region which is last week’s low respectively. Should price somehow manage to break this level of resistance at $34 900 (triple top formation), we could see new highs being printed on the Dow.
NASDAQ has simply continued its bull run as investors are attracted to technology stocks during these kinds of market conditions. Last week saw a decline in price but we saw the “Buy the Dip” mentality adopted as price slowly grinded its way back up into the highs. Should the Prior Week High hold as resistance, we can expect a pullback perhaps into the ascending trendline to continually take price higher as NASDAQ targets that $15 000 region. A break below the Prior Week Low is not likely, but should it come to fruition, that could spark interest of a stock market reset just before earnings season.
As always traders, exercise healthy risk management and we hope you have a fantastic trading week ahead. For more updates like the one above, subscribe to our blog for instant updates to your mail or join our Telegram Trading Floor via our website at http://www.aspirefx.co.za.