The Dow Jones Index (CBOT: YM) is on an upward tear, extending its gains for the eleventh session in twelve. This bullish run coincides with positive economic data and a shift in investor sentiment. April’s inflation report showed a welcome slowdown, with both headline and core inflation dipping below expectations. This has bolstered hopes that the Federal Reserve may ease interest rates sooner than anticipated, potentially in September.
Further fueling the rally are strong corporate earnings and a recent survey by BofA Global Research indicating the most bullish investor sentiment since November 2021. This newfound risk appetite is evident across asset classes, with Bitcoin soaring and meme stocks regaining some shine.
Technical Analysis
The 4-hour chart shows the index’s technical picture aligns with the bullish sentiment. The price action trades comfortably above the 20-SMA (green), 50-SMA (blue), and 100-SMA (orange), with the shorter-term averages positioned above the longer-term ones, suggesting the presence of a moderate upward trend.
Therefore, should the price action continue its upward trajectory, short-term trading opportunities could exist towards the all-time high of 40,358. A break above the initial resistance could confirm the bullish momentum, likely bringing the 23.60% Fibonacci extension level (40,960) and 38.20% Fibonacci extension level (40,901) firmly into play.
However, caution is advised; with the RSI (76.07) trending firmly at overbought levels, short-term trading opportunities could arise towards the initial support at 39,392 should the price action sustain a retracement from the overbought levels. A break below the 39,392 level would likely bring the 38,937 and 38,432 support levels into play in the short term.
Summary
The Dow Jones Index is exhibiting strong bullish momentum, supported by a positive economic backdrop and easing inflation concerns. Technically, the uptrend is confirmed by the price action trading above key moving averages and the potential for reaching Fibonacci extension levels. However, a short-term retracement is possible due to overbought RSI readings.
Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire, MT Newswire, U.S. Census Bureau, U.S. Bureau of Labor Statistics.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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