The Dow Jones Industrial Average, S&P 500 and NASDAQ Composite index have recovered very well after falling in the first half last week. The S&P 500 and the NASDAQ Composite index recouped all their losses and were up 0.09 per cent and 0.4 per cent, respectively for the week. The Dow Jones on the other hand ended the week marginally lower by 0.27 per cent.
On the charts, the picture broadly remains positive. The US benchmark indices have potential to rise further going forward. Here is our analysis.
Dow Jones (53,419.33)
The index is getting good support around 52,700. Near-term resistance is around 53,900. A break above it can take the Dow Jones higher to 54,750-55,000 in the coming weeks. An extended rise to 56,000 is also over the medium term.
The short-term outlook will turn negative if the index declines below 52,700. If that happens, a fall to 52,200-52,000 can be seen. Such a fall can increase the downside pressure on the index.
S&P 500 (7,718.61)
The support at 7,600 has held very well in line with our expectation. The S&P 500 index fell to a low of 7,611.20 and then risen back sharply. That keeps the door open to see 7,770-7,800 on the upside in the short term. The S&P 500 index has to fall below 7,600 to turn the short-term picture negative and see 7,500 and lower levels.
From a big picture, a decisive break above 7,800 can boost the momentum. It can then take the index up to 8,000 in the medium term. We reiterate that the region around 8,000 is a strong resistance which can halt the rally and trigger a reversal.
NASDAQ Composite (26,506.99)
The 26,000-25,900 support zone has limited the downside for the third consecutive week. The NASDAQ Composite index has risen back well after touching a low of 25,995 last week.
That keeps the bias positive to see 27,000-27,200 in the short term. A break above 27,200 can trigger an extended rise to 28,000-28,200.
We repeat that the 28,000-28,200 is a crucial long-term resistance zone where the upmove can halt. A reversal thereafter can drag the index down to 27,000-26,000 and even lower. So, it is important to turn cautious as the index approaches 28,000 rather than retaining the bullish stance.
Dollar Outlook
The dollar index (99.16) has come down sharply after making a high of 99.85 last week. The weekly chart indicates a range of 98.50-99.85. That leaves the short-term outlook unclear. We will have to wait for a breakout on either side of 98.50-99.85 to get clarity on the next direction of move.
A break above 99.85 and a subsequent rise above 100 will be bullish to see 101 and higher levels. On the other hand, a break below 98.50 can take the index down to 98.20-98. The price action thereafter will need a close watch as a break below 98 can be bearish for the dollar index.
Treasury Yield
The break above 4.75 per cent and the rise to 4.8 per cent on the US 10Yr Treasury Yield has happened in line with our expectation. The yield touched a high of 4.82 per cent and has come down slightly from there.
Outlook remains bullish. Immediate support is in the 4.75-4.7 per cent region which can limit the downside. The US 10Yr Treasury Yield has potential to target 4.95-5 per cent in the coming weeks.
In case the yield declines below 4.7 per cent, a fall to 4.6 per cent can happen first. Thereafter the yield can rise back again.
