The market continues to march higher as the war in Israel hasn't spread to other Arab countries. In fact, yesterday the US intelligence has even reported that Iran was surprised by the Hamas attack. This has weighed on Crude Oil prices and eliminated the risk of a much bigger spike. Moreover, the US PPI report yesterday beat expectations, but it was mainly energy driven and the market brushed it aside as we got a big drop in Oil prices in October and even Fed's Waller sounded like a rate hike in November is not coming unless we get a very ugly CPI report.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones has now erased almost half of the losses seen in the prior month as the market continues to charge higher targeting the key resistance zone around the 34000 level. That’s where we are likely to see the sellers coming into the market with more conviction as they will have a better risk to reward setup to position for another drop into the lows.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the break above the minor downward trendline saw even more buyers coming into the market as a key barrier got taken out. There’s now a minor resistance defined by the previous swing high around the 33893 level, but at this point we should see the price getting into the 34000 resistance zone before seeing more bearish pressure coming into the market.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the divergence with the MACD signalled a loss of bearish momentum and led to a reversal after the break of the minor trendline. The buyers yesterday leant on the red 21 moving average to position for another bullish impulse into the 34000 resistance. A break of the most recent high might see more buyers piling into the market but we are now near the sellers’ area, so we are likely to see the bullish momentum weakening and the MACD could be helpful to time the reversal. An ugly CPI report today might already be enough for the sellers to reverse this entire rally.
Upcoming Events
Today we will get the most important report of the week, that is the US CPI report. The market is likely to focus on the core measures and react positively to lower than 0.4% monthly rate readings. At the same time, we will also see the latest US Jobless Claims data which is an important labour market report. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment report.
