Last week, the risk sentiment started on a positive
note at the beginning of the week due to the lack of a ground offensive in
Gaza. Unfortunately, things went south from Wednesday onwards as Israeli PM Netanyahu
delivered a speech where he said that they were preparing for a ground
invasion.
Moreover, the US Jobless Claims data on
Thursday showed another big miss in Continuing Claims, which might be an
indication that the labour market is weakening. On Friday, the risk sentiment
deteriorated further as market participants likely didn’t want to hold long
positions into the weekend, especially after early reports of the start of the
invasion.
Over the weekend we got reports of a ground offensive being indeed
underway. We will see how things will evolve during the week, but the market
will also have lots of important economic data to digest.
Dow Jones Technical
Analysis – Daily Timeframe
Dow Jones Daily
On the daily chart, we can see that the Dow Jones
last Friday broke the key 32597 level as the market leant on the defensive side
into the weekend. The selloff has got a bit overstretched as depicted by the
price distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.
Dow Jones Technical
Analysis – 4 hour Timeframe
Dow Jones 4 hour
On the 4 hour chart, we can see that the latest leg
lower is diverging with the
MACD right
after the breakout. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, we might see a pullback into
the minor trendline where we
can also find the Fibonacci retracement levels
for confluence.
This is where the sellers are likely to step in
with a defined risk above the trendline and target new lower lows. The buyers,
on the other hand, will want to see the price breaking above the trendline to
pile in and position for a rally into the major trendline around the 33300
level.
Dow Jones Technical
Analysis – 1 hour Timeframe
Dow Jones 1 hour
On the 1 hour chart, we can see more
closely the bearish setup around the minor trendline and we can also notice
that on this timeframe we also have the red 21 moving average adding an extra
layer of confluence. This will be a key spot to watch out for as a rejection is
likely to lead to new lows while a break should trigger a rally towards the
33300 level.
Upcoming Events
This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Tomorrow, we have the US
Employment Cost Index and the Consumer Confidence report. On Wednesday, it will
be the time for the US ADP, the ISM Manufacturing PMI and the FOMC rate
decision. On Thursday we will get the US Jobless Claims data, while on Friday
we conclude the week with the US NFP report and the ISM Services PMI.