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
Dow Jones Daily
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
Dow Jones 4 hour
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
Dow Jones 1 hour
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.
