Dow Jones Industrial Average (DJIA)

• U.S. markets pulled back last week, with the DJIA, S&P 500, and NASDAQ declining 0.5%-0.6% despite a modest rally last Friday. The S&P 500 ended 2024 with a 25% gain, its second consecutive year of over 20% growth, driven largely by tech stocks. Bond markets saw moderate gains amid volatility, with the 10-year Treasury yield rising to 4.57% from 3.88% in 2023. U.S. crude oil climbed 4% to USD74 per barrel, its highest since mid-October.
• Looking ahead, U.S. banks will kick off the quarterly earnings season in mid-January, with the street projecting S&P 500 companies' 4QCY24 EPS to grow by 11.9% YoY, the strongest since 4QCY21, according to FactSet. January's market performance often sets the tone for the year, with 71% of the years since 1929 seeing the S&P 500 aligning with its January direction, per S&P and DJIA Indices. This week's key events include the December Fed minutes release on Wednesday, the U.S. labor market report on Friday, and potential tech-related announcements during the Consumer Electronics Show (CES) from January 7-10, where Nvidia's Jensen Huang is slated to deliver a keynote on Monday.
• Technically, the DJIA has consolidated near its 13-week SMA, which has historically served as a key support level to sustain its upward trend since April 2024. Last week's rebound from this level reinforces its significance. While the DJIA's weekly technical indicators suggest room for further side-way consolidation, the daily chart signals early signs of recovery, with the stochastic indicator rebounding from oversold territory and a bullish divergence emerging in the 14-day RSI.
• In short, increased volatility is expected this week, with an upward bias. However, gains may be capped near the 5-week SMA for now. Key resistance levels are at 43,260 (5-week SMA) and 45,071, while support levels are at 42,281 and 41,211, aligning with the 23.6% Fibonacci retracement.

Source: Kenanga Research - 6 Jan 2025