Dow Jones Industrial Average (DJIA)

• The S&P 500, NASDAQ, and Dow each gained over 1% for the week, marking a third consecutive week of recovery after a rocky start in early August. Despite a choppy beginning, the markets ended on a strong note Friday, driven by U.S. Federal Reserve Chair Jerome Powell’s remarks. Powell’s statement that “the time has come for policy to adjust” heightened expectations of an interest-rate cut at the Fed’s September 18 meeting. Speaking from Jackson Hole, Wyoming, Powell pointed to a cooling labor market and easing inflation nearing the Fed’s 2% target as key reasons for this anticipated policy shift.

• Looking ahead, Fed Chair Powell’s recent speech aligns with market expectations, which might lead to some profit-taking early in the week as investors may feel that "everything is priced in." A clearer market direction is likely to emerge post Wednesday, following NVIDIA's highly anticipated earnings report. Wall Street expects NVIDIA to post a fifth straight quarter of triple-digit gains, with sales projected to rise by 113% to USD28.7b and earnings by 141% to 65 cents. The market's wildcard lies in whether NVIDIA can meet demand with its current-generation Hopper AI processors and details of a potential delays in the next-generation Blackwell processors. Additionally, the US core PCE, the Fed's preferred inflation gauge, is set to be released on Friday, with expectations of a 2.7% YoY increase, up from 2.6% in June.

• Technically, while closing at an all-time high last Friday is a positive signal, divergence in the weekly stochastic and RSI indicators, along with a relatively high MCDX index, suggests a short-term pullback could be imminent, given that the market has likely priced in most expectations.

• Overall, we expect a volatile week ahead, with potential pullback or profit-taking early in the week. NVIDIA’s Wednesday earnings report will likely play a pivotal role in shaping the market's direction over the near-term. Immediate resistance levels to watch are at 41,376, followed by 43,406. On the downside, key support levels are at 40,259, followed by 40,114, which aligns with the 5-week SMA.

Source: Kenanga Research - 26 Aug 2024