DJIA Market Update: Dow Performance Following NFP Report
Short-Term Outlook
- The 44,000-point threshold has been briefly breached, yet market fluctuations have shown a neutral trend within this range.
- Following the release of the Non-Farm Payroll (NFP) data, which reported 227,000 new jobs, the Dow experienced a decline.
- The CME is signaling a strong likelihood of over 85% for a potential reduction in the Federal Reserve's interest rates, which could bolster the Dow Jones in the near future.
Despite eclipsing the 44,000-point threshold, the Dow has displayed a modest growth of over 7% since November. Nevertheless, after Friday's NFP release, a dip of approximately 1% has been noted.
The Employment Landscape
On December 6, the NFP data revealed a consistent bullish trend in new job additions, surging from a previous figure of 36,000 to 227,000, well above the anticipated 200,000.
This increase may influence the Federal Reserve's strategy, particularly with the holiday season potentially driving consumer spending in the coming weeks. Such dynamics could push the Fed's policy makers towards a more hawkish stance regarding interest rates, thereby impacting the outlook for the Dow Jones negatively.
Recent NFP Insights
Source: FX Street
The upcoming Consumer Price Index (CPI) report for the United States, set to release this Wednesday, is projected to reflect a year-over-year increase of 2.7%, slightly above November's 2.6%. A reading that surpasses expectations could impact perceptions of the Dow Jones Industrial Average (DJIA), as market participants might foresee the need for the Federal Reserve to adjust monetary policies to combat inflation.
Inflation Update
Future Federal Reserve Decisions
Recently, FED Chair Jerome Powell acknowledged that current expectations for interest rate reductions are being met; however, indications of accelerated changes in upcoming policy remain vague.
Low interest rates play a critical role in instilling confidence within equity index markets, essential for sustaining a robust long-term upward trend.
FED Decision Probability Insights
Source: CME Group
The CME Group's forecasts indicate nearly 85% probability of a rate cut to the 4.25%–4.5% range, while approximately 14.2% envision the rates remaining at 4.5%–4.75%. Consequently, the Dow Jones is expected to remain in a consolidation phase as investors await the December 18 meeting outcome. As the anticipated rate cut is likely already priced into the market, focus will shift to Mr. Powell's post-announcement commentary. A dovish tone could help the Dow sustain its upward trajectory, whereas a more hawkish outlook may generate downward pressure as markets recalibrate their expectations for future cuts.
Dow Jones Technical Overview
The Dow Jones Industrial Average (DJIA) has sustained a consistent upward trend, recently hitting a historical high of 45,000 points during the last trading sessions. Daily price movements have remained stable around 0.6%, suggesting investor indecision at the 44,000-point resistance level.
Source: TradingView.com
- Consistent Growth: Beginning near 38,000 points in August, the DJIA has persistently advanced into the 44,000-point consolidation area. Notably, the 50 and 100-day simple moving averages remain below price levels, indicating no immediate threat of a significant bearish correction.
- Potential Divergence: Currently, a bearish divergence is detected, with prices reaching new highs while the Relative Strength Index (RSI) remains stable. This scenario suggests that price action might be outpacing momentum, hinting at possible declines ahead. Additionally, the MACD indicator shows a recent crossover beneath the Signal line, suggesting that the bullish momentum may be diminishing, which could invite short-term corrections for the Dow.
- Critical Levels:
- 44,000 points: This acts as the current resistance zone; sustained movement above this point could affirm bullish momentum.
- 43,100 points: The nearest support level, representing a potential area for bearish retracements.
- 41,700 points: A distant support level; movement here could put the bullish trend at risk.
The upcoming inflation report and the Federal Reserve's decisions will significantly influence whether the Dow Jones Industrial Average (DJIA) can revisit its peak of 45,000 points in the approaching sessions.
