Investors are cautiously optimistic as the Dow Jones Index futures (CBOT: YM) continue their ascent, reaching their highest since early 2022. The market mood appears positive, primarily driven by anticipation for crucial U.S. CPI data and the Federal Reserve’s upcoming meeting. Despite uncertainties surrounding corporate earnings, including Oracle’s weaker-than-expected forecast and Lucid’s CFO departure, the market remains focused on the CPI report’s potential impact on the Fed’s rate policy.
The CPI data for November, expected to reveal a stable month-on-month headline inflation and a 0.3% increase in core CPI, aligns with the Fed’s ongoing vigilance on inflationary pressures. Traders are positioned for the Fed’s rate-hike pause but remain watchful for hints regarding future rate cuts amid declining inflation.
Technical Analysis:
The Dow Jones Index exhibits a sideways upward movement within an ascending channel pattern in the 4H chart, presently trading at 36,869. Supported by the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), the index displays a strong bullish sentiment. The RSI indicates overbought conditions but lacks downward momentum, suggesting potential price stability.
Short-term opportunities may arise if the CPI data diverges from expectations. A cooler-than-expected CPI could propel the index towards the 36,935 resistance level, potentially leading to further gains at 37,066. Conversely, a hotter-than-expected CPI might trigger short-term declines towards the 36,741 support level, with potential targets at 36,608 and 36,481.
Summary:
The Dow Jones Index continues its upward trajectory, poised for potential further gains pending the CPI release. An optimistic market sentiment prevails despite uncertainties in corporate earnings.
A favourable CPI reading could trigger a bullish breakout towards 36,935 and 37,066. Conversely, a hotter-than-expected figure might lead to short-term corrections down to 36,741 or lower levels.
Sources: TradingView, KoyFin, Reuters, Trading Economics.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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