The previous week witnessed a remarkable surge in Wall Street indices, fuelled by a captivating rally powered by AI technology, with Nvidia’s stellar performance contributing significantly to the momentum. However, as the new week dawned, the Dow Jones Futures (CME: YM) opted for a brief pause, gracefully stepping back from its impressive ascent.
All eyes now turn to eagerly anticipated economic data poised to take the spotlight. Thursday holds a pivotal moment as the US unveils its Core PCE Price Index, a key metric favoured by the Federal Reserve for gauging inflation. Market expectations hover over a year-over-year decline from 2.9% to 2.8%, while monthly projections anticipate a modest uptick from 0.2% to 0.4%.
The significance of this data release cannot be overstated, as any surprises could reverberate across the market, influencing expectations regarding the Federal Reserve’s stance on interest rate adjustments. The upcoming week promises to be dynamic, with the futures market poised for potential fluctuations in response to these critical developments.
Technical
On the daily chart, the momentum clearly favours the bulls, with an impressive ascent over recent times. However, a rising wedge has formed, signalling the potential for a pullback, and with the RSI indicating potential divergence, there could be a trend reversal in the upcoming sessions if the fundamental data agrees with the outlook.
Resistance at 39,372 could be a focal point leading up to the data releases. If this resistance holds, the futures could break down the dynamic resistance of the wedge near the 25-SMA (green line). If the breakout occurs, the price could retest the prior 161.8% Fibonacci extension near the 50-SMA (blue line) at 38,050. A retracement is possible from this level to retest the breakdown level, but if the price continues to move lower, it could reach 36,837 in the longer term.
Conversely, if the price clears resistance at 39,372, there is little stopping it from continuing to form new record highs. The next technical resistance is established at the 261.8% Fibonacci extension at 41,256 and could create a challenging level to cross if the bullish momentum is sustained in the long term.
Summary
The Dow Jones futures halted its rally as the new week commenced, with crucial data releases taking centre stage. Resistance at 39,372 could be worth watching in the upcoming sessions to gauge whether a breakdown from the rising wedge could occur.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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