A week of recovery was observed in the US equities market last week with NASDAQ, the Dow Jones and S&P500 managing to close the week out at +0.14%, +0.75 and +0.64% respectively.
Although the Central Bank is gearing towards a reduction in monetary stimulus, the fundamental backdrop of last week seems to be the catalyst of a green week in the US equities market last week with Jerome Powell hinting at asset purchase tapering being completed by the middle of next year mixed with the statements made at the FOMC Meetings which sent stocks rallying as well as the 10 Year Treasury Yields.
Looking at risk events for the week ahead, it seems investors will be most interested in speeches from Capitol Hill, which will see Jerome Powell as well as Janet Yellen testify in front of Congress, as they look for clues on inflation and the Central Bank’s view on it. This week also sees PCE data being released which is normally the Fed’s preferred gauge of inflation. We should see some volatility on Thursday as we see GDP as well as Jobless Claims being released too.
Looking at NASDAQ technically, the dip was bought. As highlighted in last week’s blog post, bulls managed to take control around the $14 850 region as price formed a morning star pattern. At the time of writing, price is trading below the Prior Week High which could act as resistance, but with price being as bullish as it is, we will most likely see a break and retest of this level before continuing higher into the $15 500 region. However, one factor to take into account is the rise in 10 Year Yields. A rise in Yields normally results in a dip in the stock market with tech (i.e NASDAQ) being the most sensitive. Should tech take a hit due to yields, bears could be targeting the Prior Week Low where we saw NASDAQ reverse from last week.
Similar price action on the Dow Jones as we saw bulls take control from the $33 600 region which is a previous level of liquidity. At the time of writing, price is trading around the psychological level of $35 000 which could act as resistance going forward unless it is broken and retested to the upside which would then bring the next level of resistance into play, namely $35 200. Should we have a technical correction occur, we could see the $34 500 level being tested once more before continuing higher.
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.