In the early days of 2024, the Dow Jones Futures (CME: YM) encountered a rocky start, shedding 72 basis points and revealing a nuanced market sentiment.
A notable factor contributing to this volatility is the evolving expectation surrounding the Federal Reserve’s monetary policy outlook, with a diminishing likelihood of rate cuts in March, as indicated by CME’s FedWatch Tool. The probability of a cut, once at 79%, has dwindled to 65.7% within a week. This shift has not only bolstered the resilience of the Greenback but also exerted downside pressures on equities.
Furthermore, the tenth-largest company on the Dow Jones Industrial Average by weight, The Boeing Company, faces its own set of challenges, as revelations of loose parts in some aircraft have triggered a significant 10% dip in market value within a week. This has further influenced the trajectory of the Dow Jones Futures. Attention will pivot to the US inflation data due Thursday and will likely drive the short-term trajectory of the index futures as markets decipher the potential outlook of interest rates.
Technical
The Dow Jones Futures, displaying a predominant uptrend above the 100-day moving average, recently encountered challenges as downside pressures converged with the moving average.
This resulted in the formation of a discernible descending channel pattern in the 4-hour timeframe. The all-time high of 38113 established a notable resistance level, formed from the downturn from the peak. Conversely, the 37494 level emerged as a robust support, originating from a surge in the index futures after grappling with oversold RSI conditions.
Attempts to breach the upper boundary of the descending channel were met with bearish forces, prompting a retreat. In the face of persistent downside pressures, the 37494 level could become a focal point of interest. Conversely, a high-volume breakout above the descending channel’s upper boundary holds the potential for further gains, setting the stage for a plausible retest of the 38113 level.
Summary
The Dow Jones Futures confront challenges amid a shifting monetary policy outlook and corporate woes, reflected in its recent 72 basis point decline. As markets eye the imminent US inflation data, the index’s trajectory hinges on deciphering interest rate expectations. Technical patterns indicate a potential tug-of-war between the 37494 support and the 38113 resistance, underlining uncertainty in upcoming market movements.
Sources: CME, CNBC, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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