Nick Goold
Dow Jones Index
In the past week, the Dow Jones exhibited resilience in the face of global uncertainties, particularly related to the situation in the Middle East. Despite these concerns, the Dow managed to close positively, reflecting investor confidence. Notably, the index found support at the 33,000 level, encouraging investors to re-enter the market. One positive factor contributing to this sentiment was the retracement of the US 10-year bond yield, which eased some concerns and was seen as a favourable development for equities.
While the Middle East conflict continues to cast a shadow on market sentiment, the rise in oil stocks and a generally cautious "wait and see" approach among investors have prevented a more significant negative impact on the market. Inflation data in the US, including the Producer Price Index (PPI) and the Consumer Price Index (CPI), came in higher than expected. This suggests that the Federal Reserve may need to maintain high interest rates, but it did not significantly alter market expectations regarding future interest rate policies.
Looking ahead to the upcoming week, market participants can anticipate increased volatility. Notable events include releasing US Retail Sales data on Tuesday and scheduled speeches by Federal Reserve Chairman Powell and other Federal Open Market Committee (FOMC) members throughout the week. The strength in oil prices continues to be a source of concern for the broader market, coupled with ongoing geopolitical tensions. As a result, it may be challenging for the Dow Jones to make significant gains beyond the 34,000 level in the near term. For many traders, the coming week will likely focus on identifying selling opportunities in this uncertain environment.
Resistance: 34000, 34600, 35000, 36000, 36500, 37000
Support: 33000, 32785, 32550, 31750
Nikkei 225 index
The Nikkei experienced a highly positive week, surging by over 4%, driven in part by the USDJPY exchange rate returning close to 150. This development is widely regarded as beneficial for Japanese company earnings, enhancing their competitiveness in international markets. While the Japanese authorities have expressed their readiness to intervene to prevent excessive appreciation of the USDJPY, they have not been active in the foreign exchange market, allowing market forces to play a more prominent role.
In global economic news, the International Monetary Fund (IMF) raised its outlook for US growth in 2023 from 1.4% to 2%. The upward revision is attributed to several factors, including pent-up demand, resurgence of inbound tourism, accommodative monetary policies, and easing supply chain constraints, particularly benefiting auto exports.
Despite the recent strong performance, the Nikkei may encounter challenges in making significant gains from its current levels in the near term. With this in mind, investors and traders may find it more suitable to explore range trading opportunities in the coming week. This approach acknowledges the potential for market consolidation or limited movement as the Nikkei adjusts to the recent developments and external economic factors affecting its performance.
Resistance: 33000, 33375, 34000, 35000
Support: 31650, 30800, 30250, 30000
