US equities sway with a mix of optimism and trepidation this week as the Dow Jones Industrial Average (US 30) grapples with inflation concerns, while the tech-laden Nasdaq Composite Index presses forward amidst increasing resistance. Notably, Nvidia’s (NASDAQ:) robust performance fueled a more than 7% surge last week, propelling it to new heights and warranting investor attention.
However, apprehensions loom over forthcoming US Personal Consumption Expenditure (PCE) data, casting a shadow on equity markets. Lingering inflationary pressures have instilled caution, with hopes of any Federal Reserve rate cuts in 2024 slowly eroding. The impending PCE report could serve as a compass for traders, steering sentiments in the short term. A soft data reading might embolden buyers, elevating the Nasdaq and tilting momentum away from the Dow. Conversely, sustained inflationary cues could escalate a broader market sell-off.
Technically, the Nasdaq holds more leeway for retracement compared to the Dow. The tech-centric index has adeptly retained recent gains, buoyed by a resilient Relative Strength Index (RSI) flirting near the 70 threshold. In contrast, the Dow’s RSI has tapered toward the 40 level, historically a support zone. Traders should keep an eye on the upward trendline from the October 2023 and April 2024 lows, presently at 38,357. A breach beneath this line could potentially unlock a downside path towards 37,000.
Deteriorating Dow Jones (US 30) Chart
Note: Past performance does not predict future results.
The Nasdaq also boasts a supportive ascending trendline derived from April and May lows, standing 3.8% below the current benchmark at 17,960, unlike the Dow’s mere 0.8% distance. Notably, the index showed a 1% dip in Wednesday’s London trading session, hinting at hesitancy near recent highs. The index’s momentum significantly tied to Nvidia’s fortunes could indicate impending turbulence, particularly if concerns arise of an inflated stock price nudge investors towards anticipating retracements.
Resilient Nasdaq Composite (US 100) Chart
Note: Past performance is not necessarily indicative of future results.
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