Nick Goold
Dow Jones Index
The Dow experienced a downturn this week, caught in the crosswinds of strong economic data which, while indicating a healthy economic backdrop, also propelled interest rates higher. The 10-year US Treasury yield momentarily spiked to 4.31%, nearing a 15-year high. This increase in interest rates, often seen as a countermeasure to curb inflation amidst booming economic activity, unfortunately, has a dampening effect on equities, illustrating the nuanced relationship between strong economic performance and stock market reactions.
The recent jobless report revealed encouraging signs, with lower-than-anticipated numbers hinting at a buoyant labor market. Further bolstering the economic optimism was the Institute for Supply Management's recent report, showcasing a surge in the services sector activity, its highest since February. Apple's decreased by nearly 6% following China's restriction on iPhone usage among its government employees, weakening investor sentiment.
Currently, the Dow is oscillating between 34000 and 35000. In this uncertain climate, where the potential rise in interest rates casts a shadow, investors may find solace in adopting short-term trading strategies or capitalizing on opportunities within the current 34000 to 35000 range, especially in light of the forthcoming US inflation and retail sales data, which are expected to induce market volatility this week.
Resistance: 34600, 35000, 36000, 36500, 37000
Support: 34,000, 33610, 33000, 32550, 31750
Nikkei 225 index
The Nikkei started the week strong, building on recent gains due to a hopeful outlook on the Japanese economy and a weaker yen. However, the positive momentum stumbled when it approached a three-month high, with shifts in US market sentiments encouraging people to sell their Japanese stocks. Additionally, worries about China's slowing economy and its possible impact on global demand made investors more cautious.
Unfortunately, the latest data suggests Japan's economy might not be doing as well as hoped. The growth rate for the second quarter was adjusted downwards to 4.8%, less than the initial 6% estimate. This news has caused some negative feelings among investors, dampening the early-week enthusiasm.
As we move forward, all eyes are on the upcoming release of the Japan Tankan Index, a vital indicator of the mood among manufacturers in Japan. Although this index has shown signs of strength recently, the current technical signals hint at a weak phase for the Nikkei, which is below its 10-day moving average. While we might see some more sluggish movement this week, the fundamental outlook remains positive, suggesting that there might be good buying opportunities for swing traders at lower levels.
Resistance: 33000, 33375, 34000, 35000
Support: 31650, 30800, 30500, 30000
