Dow Jones Industrial Average (DJIA) (Downward Bias)

• The US stock market experienced significant losses last Tuesday due to a higher-than-expected CPI inflation report, and saw modest declines again on Friday following the PPI data. Despite these setbacks, the DJIA and S&P 500 ended the week relatively unchanged, while the Nasdaq dropped by 1.3% WoW to 15,775.65. The bullish sentiment, especially in AI stocks, remained strong throughout the week. The 10-year US treasury yields spiked to a 2024 high of 4.28% amid the inflation concerns, and crude oil prices reached three-month highs.

• In the coming shortened trading week, the focus is on the Federal Reserve's late January meeting minutes on Wednesday, with markets eager for clues on future rate adjustments and balance sheet policies. Corporate earnings will also draw attention, particularly Walmart and Home Depot's Tuesday results for retail insights, and chipmaker NVIDIA's 4Q earnings on Wednesday, which could impact the market significantly if they provide optimistic guidance on artificial intelligence developments.

• Technically speaking, the DJIA's weekly chart displays a 'Doji' pattern after a period of consolidation, hinting ofat a possible trend reversal. The persistent overbought condition as shown by the stochastic indicator, along with a stagnant MCDX's banker chip, suggests that market optimism may already be factored in, indicating a cautious short-term outlook ahead

• Overall, we expect heightened volatility in the DJIA this week with a downward- bias trend. If NVIDIA does not meet expectations, the index may not sustain its key support at 37,887 (or its 5-week SMA), potentially leading to bargain hunting near 36,952, the peak of the previous upcycle. Conversely, continued market optimism could push the DJIA toward resistance levels at recent highs of 38,927 and 40,257.

Source: Kenanga Research - 19 Feb 2024