BUY THE DIP! Yet another red week within the US indices market as we saw NASDAQ, the Dow Jones and S&P500 closed out the week at -0.97%, -0.42% and -0.97% respectively.
US indices made a valiant effort to try and hold support throughout the course of last week but to no avail as bears came into the market on Friday with continued bearish momentum at the time of writing. The markets seemed to be relatively unphased following weak CPI and Jobless Claims data coming out of the US.
On this week’s docket in terms of risk events, all eyes will be peeled for the FOMC Meetings happening. The Federal Reserve will meet on Tuesday and Wednesday to discuss its monetary policy in the midst of a build-up in fundamental anticipation. Investors however seem to be slightly apprehensive towards this as the Fed is known for playing down the demand for tapering of asset purchases. This being said, I would not be surprised if investors position themselves for both ends of the spectrum regardless of what comes out of the FOMC meetings. Should said situation play out, we could see a reduction in liquidity which could cause stocks to sell off before we actually see the dip bought up. Jerome Powell will be speaking on Friday as well which could throw another wrench into the works.
Looking at NASDAQ from a technical perspective, we can see how the $15 400 region was holding as support until Friday closed below with a bearing engulfing candlestick. At the time of writing, NAS is falling into zones of high confluence. Price is currently approaching the 61.8% Fib retracement level which lines up our 50 day EMA (red line) as well as with a previous level of resistance turned potential support going forward. Should investors dry some liquidity from the market, we could potentially see dips into our 78.6 Fib level in line with the ascending trendline stemming from lows in July and August as well as the psychological level of $15 000.
Similarly to NASDAQ, the Dow Jones is also approaching zones of high confluence where we could see an injection of liquidity. Last wee saw the Dow try and hold support on the psychological level of $34 500 to no avail. At the time of writing, price is sitting at a Daily trendline as well as the psychological level of $35 000 in line with our 61.8 Fib retracement level. Should this level not hold, we could see dips into our 78.6 around the $33 500 region. Do not attempt to catch a falling knife. Wait for reversals on the lower timeframe before entering larger 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.