The equity market remains confused on the next big move
Dow Jones Index
The US equity markets were looking for a trend to follow last week but ended the week close to unchanged. US CPI was on expectations and US PPI showed higher than expected inflation along with better than expected US retail sales figures. Long term US interest rates continued to rise which is negative for equities but many investors remain confident that 2023 will be positive.
Following a holiday on Monday, the major news event this week is the release of the Fed meeting minutes which will be closely watched. Despite the lack of news this week could see volatility increase as the market is due to breakout of its narrow range from the past three weeks.
It is always difficult to forecast which way a range will break and best to keep an open mind. Given the equity has been hoping for higher values this year and we are close to unchanged in 2023, sellers could start entering the market on higher interest rates fears. A fall is likely to be short term in nature though as there is no major news recently and the medium term trend is always sideways.
Resistance: 34500, 35000, 35500, 36000, 36500
Support: 33500, 33000, 32500, 32000
Nikkei 225 Index
The Nikkei has also started to trade in a narrow range and could start moving this week. The outlook for the Nikkei looks more positive than the Dow Jones index as the USDJPY looks likely to continue higher. Also, the continued increase in tourism will boost the profits of Japanese companies this year.
Japanese Inflation data will be released on Friday, while inflation in Japan is much lower than the US it is still a worry for the Japanese consumer. A higher than expected inflation figure could result in a quick fall as the market could worry about a change in Bank of Japan`s policy leading to higher interest rates.
Short term prices could fall due to profit taking and a reversal in the USDJPY but expect support at 27,000 to hold. In the medium the Nikkei remains range bound so should the market move higher expect 28,000 resistance to attract selling.
Resistance: 28000, 28300, 28500
Support: 27375, 27150, 27000, 26250, 25500, 25000, 24500