Dow Jones Buyers Strive to Maintain Momentum Amid Major Index Declines

Friday Market Overview:

Wall Street reacted unexpectedly to milder-than-expected inflation data. Despite increasing optimism about a potential rate cut in September, heavyweight technology stocks experienced significant losses following the inflation readings. Meanwhile, the Dow Jones Industrial Average, which includes companies that are often favored in risk-on environments, is striving to maintain its bullish tone ahead of the quarterly earnings reports.

Technical Analysis:

On the daily chart, the Dow Jones has maintained its uptrend, trading above its moving averages. The recent breakout above the key resistance at 39,665.00 has further strengthened the bullish narrative. Buyers are now challenging the critical resistance at 39,852.00. A sustained break above this level would target the next resistance zone between 40,089.88 and 40,352.50, around the index’s historical high.

Alternative Scenario:

On the other hand, if sellers return and push the price below the support at 39,665.00, the next supports at 39,402.38 (near the 34-period moving average) and 38,977.50 (near the ascending trendline) will come into focus.

Key Levels:

Resistance Levels:

• Resistance 3: 40,352.50
• Resistance 2: 40,089.88
• Resistance 1: 39,852.00

Current Price (at the time of analysis): 39,869.35

Support Levels:

• Support 1: 39,665.00
• Support 2: 39,402.38
• Support 3: 38,977.50

Impactful Events:

The CME FedWatch Tool indicates an 82% probability of a 25-basis point rate cut in September, up from 64% last week. Later on Friday, the Producer Price Index (PPI) inflation data is expected to provide further insights into this trend. Any additional signs of easing inflation are likely to increase expectations for rate cuts.

Oscillators and Risk Warnings:

RSI (Relative Strength Index): Bullish, indicating strong buying momentum.

MACD (Moving Average Convergence Divergence): Bullish, supporting the upward trend.

Moving Averages: Bullish, reflecting the current positive price action.

Conclusion:

The Dow Jones Industrial Average is exhibiting strong bullish momentum as it approaches key resistance levels. A sustained break above 39,852.00 could propel the index towards 40,089.88 and 40,352.50, aligning with its historical high. Conversely, if sellers regain control, the price may fall towards supports at 39,665.00, 39,402.38, and 38,977.50.

Investors should monitor the upcoming PPI inflation data and any developments from the Federal Reserve closely, as these will significantly influence market sentiment and the Dow Jones’ price trajectory. Keeping an eye on these key events and technical levels will help traders navigate the current market environment effectively.