Last week, the US CPI came basically in line with expectations, but the good news is that the Core M/M reading once again printed at 0.2% or 0.16% unrounded. The not so good news is that the US Initial Claims spiked higher coming at 248K vs. 230K expected, but Continuing Claims remained strong. We have already seen Claims spiking higher in the past months, but the overall picture remains positive for now. The long-term inflation expectations in the University of Michigan report ticked lower, so on the data side the week was positive. Nonetheless, the Dow Jones finished the week negative and it’s hard to find a clear reason other than a technical pullback or global growth worries.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones struggled to sustain the rally after breaking out of the key 35289 resistance and started to pull back. The fall below the resistance might be a bad omen for the bulls as a fakeout might lead to a big selloff. For now, the bullish trend remains intact as the price will need to break the trendline to the downside to confirm a fakeout. The price has recently bounced on the 38.2% Fibonacci retracement level as the buyers are stepping in to target a new high. The last line of defence for the buyers will be the trendline.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is consolidating around the key 35289 resistance. We will likely need a fundamental catalyst to end this rangebound price action and see a more sustained trend.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the range between the 35100 support and the 35600 resistance. A break to the upside should see the buyers piling in and extend the rally to a new high. On the other hand, a break to the downside should give the sellers more control and lead to a quick fall into the trendline where the sellers will target a breakout.
Upcoming Events
This week is a bit empty on the data front and the lower summer liquidity might trigger false moves. On Tuesday we will see the latest US Retail Sales report where the market is likely to react positively in case of a beat and negatively in case of a miss. The US Jobless Claims on Thursday is likely to be the main event of the week as another big miss may cause recessionary fears and weaken the market even more, while strong data should give the Dow Jones some support.
