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Equities continue to recover and look to break resistance

Nick Goold

Dow Jones Index

The fourth week in a row of gains for the Dow Jones index as worries about the banking sector are over. The week started quietly with the Easter holidays. However, activity increased following the lower-than-expected US CPI inflation data announcement, which was lower than expectations pushing the index higher.

On Friday, US retail sales were weaker than expected, but Fed's Waller's comments were more important. Waller surprised the market by saying more rate increases are needed to control inflation. Also, the Univ. of Michigan consumer sentiment (preliminary) indicated rising inflation expectations from consumers rising sharply to 4.6% from 3.6%.

The index closed the week at the 34,000 resistance level as strong US bank earnings helped push the market higher. Next week, while there are few critical economic indicators, more US financial institutions will release earnings. While inflation worries remain, higher levels look likely as the Dow Jones index targets a test of 34,500 in the coming weeks. Large moves are unlikely in the short term, so that short-term traders will find many range trading opportunities.

Dow Jones chart Apr 16

Resistance: 34000, 34500, 35000

Support: 33600, 33000, 32550, 31750, 31450, 31000

Nikkei index

Warren Buffet visiting Japan and raising his stake in Japanese trading companies helped the Nikkei index to its highest level in the past month. While the USDJPY tested lower, preventing more significant gains at the start of the week, worries about higher US interest rates resurfaced, pushing the USDJPY higher and helping the Nikkei close the week strongly.

The Nikkei index is now close to 2023 highs at 28,725; we expect this level to be tested in the medium term. However, in the short term, the market is overbought, so waiting for the market to return close to 28000 to 28250 to buy seems the better strategy.

Nikkei 225 chart Apr 16

Resistance: 28725, 29000, 29250

Support: 28000, 27425, 26950, 26500, 26250, 25500, 25000