The major US indices opened Thursday’s session at fresh record highs, tracking the ECB-inspired gains in Europe. The ECB unleashed a raft of stimulus measures in a bid to boost economic growth and stave off deflation threats in the euro area. The central bank trimmed its main refinancing rate by 10 basis points to 0.15%, cut the deposit rates to negative 0.1%, announced “Targeted” Long-Term Refinancing Operations (TLTRO) and ended sterilization of bond purchases. The ECB chief, Mario Draghi, delivered a very dovish press conference and when a journalist asked if the ECB had exhausted the policy tools at its disposal, he simply said no “we are not finished yet.”
Stocks came off their best levels soon after, however, although this was most likely due to mild profit taking ahead of tomorrow’s release of nonfarm payrolls data, and as the German DAX index hit that psychological resistance level of 10,000 as we had pointed out previously. Nevertheless, the key support levels held firm on the major US indices and at the time of this writing they were approaching their session highs once again. All eyes are now on the US employment report for May, scheduled for release at 1:30 BST on Friday. Although the headline nonfarm payrolls number is expected to come in above the 200 thousand mark again, specifically 215,000, the ADP private sector payrolls report and the employment component of the ISM services PMI have shown some rather mixed indications this week. There’s thus scope for some disappointment, which could cause the indices to retreat from their record levels.
But from a technical point of view, the US indices remain in strong upward trends. Take the Dow as an example. The last time we looked at the index was in mid-May when I suggested it was about to turn higher following the mini correction. I specifically pointed to the 50-day moving average which was then at around 16400. Sure enough, that is where the market turned before rallying to fresh record highs. But with the NFP coming up, it is important to highlight levels where we may see some selling activity from the existing longs. A few of such levels, all Fibonacci-based, are depicted on the daily chart below. Even if the market sells off from those levels tomorrow or next week, for as long as the bullish trend remains in place, my outlook would correspondingly remain bullish on the Dow and stocks in general.
Figure 1:
Comments
Post a Comment