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Dow Jones, Nasdaq 100 and S&P500 index prices gain despite Powell comments


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Volatile trade, following Fed Chair Jerome Powell’s comments at the Economic Club of Washington DC, has ultimately ended in gains for major US indices the SP500, Dow Jones and Nasdaq 100.

bg_us_flag_usa_america_368721284.jpgSource Bloomberg
 

 

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Wednesday 08 February 2023 

While the Fed chair noted that inflation was continuing to ease, he also suggested that US lending rates are likely to rise further. While disinflation has begun in the world’s largest economy, figures remain a far cry off the central banks 2% target.

Expectations are that rates are still likely to reach the 5% to 5.25% range, considered a point of neutrality.

However, Mr Powell cautioned markets that the reemergence of higher inflation and strong labour reports could push rates further than markets currently expect.

Markets appeared to dismiss the ‘hawkish’ comments from the Fed, and major benchmark indices have started to extend the bullish trends we have seen this year.

S&P 500 (US 500)

 

802SP500.pngSource IG

The moving 20 (red), 50 (green)and 200 (blue) day simple moving averages (MAs) reaffirm the upward trend bias for the SP500 index. The stochastic oscillator currently labours in overbought territory. Our view is that the trend takes precedence over the overbought signal.

A shallow pullback on the index looks to have ended with a bullish engulfing candle pattern / price reversal. 4195 and 4220 provide the initial upside resistance targets from the move higher, while 4325 provides a longer-term upside resistance target. Traders who are long might consider using close below the 4085 low as a tight stop loss indication for the trade. A tight stop loss consideration is in lieu of the overbought conditions in play. Traders could also consider trailing a stop loss with the red trend line on the chart.

Nasdaq 100 (US 100)

802Nasdaq.pngSource IG

The technical indications on the Nasdaq 100 (US Tech 100) are like that of the SP500.

The moving 20 (red), 50 (green)and 200 (blue) day simple moving averages (MAs) reaffirm the upward trend bias for the index while stochastic oscillator currently labours in overbought territory.

A shallow pullback on the index looks to have ended with a bullish engulfing candle pattern / price reversal. 12900 and 13190 are the initial upside resistance targets from the move higher. Traders who are long might consider using close below the 12400 low as a tight stop loss indication for the trade. A tight stop loss consideration is in lieu of the overbought conditions in play. Traders could also consider trailing a stop loss with the red trend line on the chart.

Dow Jones Industrial Index (Wall Street 30)

802DOW.pngSource IG

The Dow Jones Industrial Index while also posting gains in the near term, reflects a slightly different trading environment right now to the SP500 and Nasdaq indices.

The short to medium term trend for the index is considered sideways, while the longer-term trend bias is considered up. The sideways range is considered between levels 32475 (support) and 34660 (resistance).

Traders of the index might prefer to keep a long bias to trades in lieu of the longer-term uptrend still in play. Long trade considerations might be on a bullish price reversal closer to range support or on a bullish upside break of range resistance.

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