Last Friday, the market fell as the University of Michigan Consumer Sentiment report saw a big miss across the board with the inflation expectations figures spiking back up. This might be a signal that the consumers are indeed weakening, and it could be a bad omen for the broad market. Moreover, we got some defensive positioning into the weekend as there were some expectations that Israel could start a ground offensive in Gaza and that could have led Iran to join Hamas with uglier scenarios becoming likely from that point onwards.
The actual events fell short of expectations as we haven’t got a ground operation and, although we got mixed signals, it seems like Iran is not intentioned to join this war “provided that Israel does not dare to attack Iran”. This could lead to a relief rally and the technical levels can help in identifying the likely entry and exit points.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones found resistance around the red 21 moving average and the previous swing level. The buyers should still be targeting the resistance around the 34000 level where we have a much stronger confluence from the previous swing low level, the 61.8% Fibonacci retracement level and the major trendline. In fact, if the price continues higher, we can expect the sellers to pile in even more aggressively around the resistance to position for another selloff into the lows with a better risk to reward setup.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the buyers are stepping in around the 33500 level as they have the confluence from the 38.2% Fibonacci retracement level and the red 21 moving average. If the price breaks lower, the bullish setup would be invalidated, and the sellers will start to pile in to target the 32597 support.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the support zone around the 33500 level and the rangebound price action as the battle between buyers and sellers is starting to heat up. Watch what happens around this level as a bounce should translate into another rally into the resistance zone, while a break lower is likely to trigger a selloff into the 32597 support.
Upcoming Events
This week is a bit empty on the data front. Tomorrow we will get the US Retail Sales data and it will be interesting to see if the worse consumers’ sentiment translated into weaker spending. On Thursday, we will see another US Jobless Claims report where the market will want to see if the miss in Continuing Claims last week was just a blip or something is starting to deteriorate in the labour market. On the same day we will also hear from Fed Chair Powell with the market being attentive to any type of signal on the upcoming rate decision.
