Nick Goold
Dow Jones Index
U.S. equities started last week, strongly looking to make a new high for 2023. Resistance held in quiet summer trading conditions, and then on Tuesday, Firth Ratings downgraded the credit rating of U.S. government debt from the highest level, AAA, to AA+. The market has been enjoying good news lately, so this announcement surprised the market and resulted in profit-taking selling.
On Thursday, the index traded below 35,225, forming a double-top pattern confirming the end of the strong uptrend from last month. U.S. employment data was slightly weaker than expected and had little impact on equities. The Dow closed on the lows for the week as Apple released poor earnings on poor iPhone sales.
The U.S. debt downgrade has pushed 10-year interest rates back above 4.00%, which is negative for equities. The coming week will likely see the index trade sideways to lower as the market waits for U.S. inflation data at the end of the week. Currently, selling strength or below 35,000 looks to be the best strategy.
Resistance: 36000, 36500, 37000
Support: 35000, 34600, 33610, 33000, 32550, 31750
Nikkei 225 Index
Last week, the Nikkei initially moved higher on strong earnings reports from Japanese companies benefiting from the weak yen and rising prices. Global equities suffered on the U.S. credit rating downgrade, and the Nikkei also suffered, finishing the week under pressure again near the July lows.
Japanese 10-year interest rates rose 0.10% to 0.65% following the Bank of Japan's policy change to allow interest rates to rise more freely. While interest rates could keep rising, the BOJ will prevent them from rising above 1.00%.
The USDJPY remains strong, and there is continued talk of intervention to push it lower, which would cause a significant sell-off on the Nikkei. Like the Dow Jones, selling strength around the 10-day moving average or a break of support at 31,650 looks best this week.
Resistance: 34000, 35000
Support: 31650, 30800, 30500, 30000
