Dow Jones Industrial Average (DJIA) (Downward Bias)

• Last week saw significant declines in all three major indexes, marking substantial weekly losses. The S&P 500 experienced its largest weekly drop since earlier in the year, decreasing by 0.95%. The Dow recorded its worst week in approximately a year with a 2.27% fall, and the Nasdaq saw its most considerable loss in nearly a month, dropping by 0.8%. Geopolitical tensions, particularly concerns over Israel and Iran, contributed to market volatility, as did a surge in oil prices to their highest since October. Additionally, Federal Reserve officials provided vague guidance on interest rate cuts, with some indicating the possibility of no cuts this year.

• Next week's releases of the consumer price index (CPI) on Wednesday and the producer price index (PPI) on Thursday are now more critical after last week's market downturns. Slower average price increases reported by these indices could encourage the Federal Reserve to consider a rate cut, potentially positively influencing the stock market.

• Technically, the DJIA's recent close just above its 5-week Simple Moving Average (SMA) and critical 50-day SMA suggests a pivotal week ahead. With treasury yields at their highest in 2024 and scepticism surrounding Federal Reserve rate cuts, the index faces significant headwinds. A breach below last week's low could trigger a much-anticipated short-term pullback in the market.

• In short, we're bracing for increased market volatility, particularly in the latter half of the week. A dip below last week's low of 38,559 might prompt a pull-back to the 37,584 level, aligning with the 50% Fibonacci extension. Resistance levels to watch are the psychological threshold of 40,000 and subsequently 40,257.

Source: Kenanga Research - 8 Apr 2024