• Last week saw the DJIA continuing its upward trajectory for the second week, closing 0.65% higher at 34,283.11. This surge, breaking both its downward trajectory and a critical Fibonacci resistance, was largely fuelled by growing expectations that the Fed has finished increasing interest rates, and sustained rally in technology stocks.

• The market is expected to experience heightened volatility this week, with a focus on inflation. Traders are also preparing for potential impacts of a government shutdown as the current funding measure nears expiration. The release of October CPI data on Tuesday, anticipated to show a 3.3% YoY increase, is a key event. Any higher-than-expected rise could delay future rate cuts. Moody's recent downgrading of the U.S. outlook could also affect market sentiment.

• From a technical perspective, the DJIA's weekly chart displays a rebound in the Stochastic Oscillator from oversold levels, coupled with an uptick in the MCDX's banker chip, indicating a potential bullish trend. However, despite these positive indicators, we maintain a cautious stance, awaiting the pivotal release of October CPI data on Tuesday. This data will be instrumental in shaping market expectations regarding the Fed's future rate decisions, which will, in turn, influence the nearterm performance of major indices.

• We anticipate the index to persist in its upward trend if October CPI data aligns with expectations. The key resistance levels to watch are at 34,600, followed by 35,672. On the flip side, significant support could emerge at 33,780, aligning with its 50-week SMA, or at the 33,011 level, which coincides with its 38.2% Fibonacci retracement level.

Source: Kenanga Research - 14 Nov 2023