Dow Jones Industrial Average (DJIA) (Upward Bias)

• Last week, the U.S. stock market started with a downturn but recovered with a significant upturns on Thursday and Friday. This rally was driven by chip makers' positive projections for 2024, robust December retail sales, and strong consumer sentiment. The enthusiasm for artificial intelligence and favourable economic indicators outweighed concerns about the Federal Reserve's pace in cutting rates. On Friday, the DJIA surged nearly 400 points or 1.1%, reaching a record high of 37,863.80. Over the week, the S&P 500 increased by 1.2%, the DJIA by 0.7%, and the Nasdaq Composite by 2.3%.

• This week, investor attention will shift back to Big Tech, with Netflix, Intel, and Microsoft set to announce their earnings on Tuesday and Thursday. Other major stocks such as 3M, GE, Visa, AT&T, Tesla, and AMEX are also due to release their earnings. As the market is entering the earnings season on a rally, there's a possibility that expectations might be overly optimistic.

• The DJIA's weekly uptrend is still in place, but it may encounter resistance around 38,056, which corresponds with its 50% Fibonacci extension level. Despite this, the ongoing market optimism suggests that the DJIA might test its immediate resistance levels this week, even considering the current oversold indicator and increasing bond yields.

• For the DJIA, critical resistance levels are set at 38,056 and 40,273. The immediate support level is found at its recent peak of 37,250, with additional support around 36,924, aligning with the 5-week Simple Moving Average (SMA).

Source: Kenanga Research - 22 Jan 2024