The indices market ended last week mainly upbeat with NASDAQ, Dow Jones and S&P500 closing at +0.18%, +0.81% and +0.94% respectively.
Last week’s moves higher could be due to consumer sentiment data showing that economic recovery may be slowing down. A deteriorating consumer sentiment may give the Fed more reason to stay put amid rising inflationary pressures. Last week also saw the US 10 Year Treasury Yields slowly climbing back into the 1.3% – 1.4% region. This move boosted cyclical stocks i.e Dow Jones.
In terms of risk events this week, investors will be paying close attention to Retail Sales data, FOMC Minutes as well as Jerome Powell’s speech on Tuesday. Powell could simply reiterate his cautious approach on the economy while FOMC Minutes could continue reinforcing the central bank’s broad confidence in the medium-term economic outlook. That being said, it could be enough to fuel the Dow Jones to outperform NASDAQ in weeks to come with Quantitative Easing still going strong at $120 billion a month.
As mentioned in last week’s market outlook, the “Buy The Dip” mentality was adopted as investors bought up any dips in NASDAQ. We saw a move to the upside as the psychological level of $15 000 held as support in line with the ascending trendline acting as dynamic support as well. For the week ahead, with fundamentals for stocks being bullish, a pullback would be perfect to accumulate more long positions. One more drive in $15 000 could be possible as it lines up with that previous level of support as well as the 78.6% Fib retracement level. Any closures below the 100% Fib level would invalidate bullish momentum for the time being.
Last week saw the Dow Jones find new All Time Highs after trading sideways for the past few weeks most likely due to the climb in Treasury Yields. Same approach will be applied to the Dow. Buy any dips. As mentioned earlier, with QE still going strong, this gives cyclical stocks the upper hand. Technically, a pullback from the All Time Highs could provide decent risk to reward setups to go long. This week’s focus will be the psychological level of $35 000 as it lines up roughly with the previous consolidation block as well as our 61/78.6 Fib levels. With the fundamentals this week, be weary of dips further into $34 800 or the ascending trendline potentially. Do not catch a falling knife. Wait for clear reversals before entering positions.
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.