INDICES FORECAST: #DowJones & #SP500 (13 March 2023)

Dow Jones Technical Analysis: The Index Continues to Bleed Losses

The market is currently pricing in a 40% chance that the Fed will raise its benchmark rate by 50 basis points at its next meeting, scheduled for later this month, the day before that probability was 68%.

• The Dow Jones Industrial Average continued to decline during its recent trading on intraday levels, to record good losses in its last sessions by -1.07%.
• It lost about -345.22 points, to settle at the end of trading at the level of 31,909.65.
• It happened after a decrease in Friday’s trading by - 1.66%, for the fifth day in a row, in a week in which the index witnessed its worst weekly loss since June, with a rate of -4.43%.

On Friday, regulators took control of the Bank of California after its shares sank sharply, the biggest bank failure since 2008, as other banks suffered in the wake of the collapse of the Silicon Valley bank.

In economic news, the government revealed that Nonfarm Payrolls rose by 311K in February. This represents slower growth than the revised 504K seen in January, but still higher than the 223K that economists had expected.

With wage increases, a major contributor to headline inflation, continued strength in the labor market could pressure the Federal Reserve to continue raising interest rates.

On the other hand, unemployment rose unexpectedly to 3.6% and wage inflation eased, alleviating some concerns that the still-strong labor market would lead to a sharp increase in interest rates.

The market is currently pricing in a 40% chance that the Fed will raise its benchmark rate by 50 basis points at its next meeting, scheduled for later this month, the day before that probability was 68%.

This in itself represented a significant shift from earlier in the week, after hawkish comments from Federal Reserve Chair Jerome Powell on Tuesday caused a jump in the perceived likelihood that more rate hikes were on the way. Meanwhile, the market is still pricing in odds half a point higher than it was before the Fed chair spoke a week ago.

Dow Jones Technical Analysis

Technically, the index continues its decline with continuous negative pressure due to its trading below the simple moving average for the previous 50-day period. In addition to the presence of negative signals in the relative strength indicators, as shown in the attached chart for a period (daily). In addition, the bearish trend dominates the movement of the index in the medium-term and long-mile line.

Therefore, our expectations indicate a further decline for the index during its upcoming trading, as long as the resistance at 32,582 remains stable. Especially if it breaks the current support of 31,909.65, to then target the support level at 30,454.46.

S&P 500 Forecast: Choppy After NFP

The S&P 500 has been experiencing back-and-forth movement during the trading session on Friday, with mixed results from the jobs report.

• The S&P 500 experienced some back and forth during the trading session on Friday, indicating that the market is still experiencing a lot of noisy behavior overall.
• The jobs report had mixed results, with the overall employment figures hotter than anticipated, but the wage inflation and pressure dropping slightly.
• However, the intentions of the Federal Reserve are clear, with Jerome Powell stating on Tuesday that he intends to raise interest rates and may even raise them higher and quicker than previously anticipated.
• This could put upward pressure on the US dollar, potentially putting negative pressure on equities and other risk-appetite markets.

The 200-Day EMA and the 50-Day EMA are both flat and above the candlesticks of the last few days, which typically indicates that the market is trying to figure out its next move. If the market breaks down below the bottom of Friday's candlestick, the S&P 500 could go looking for support at the 3800 level, which was the scene of a major swing low. Any further declines could result in a significant amount of selling pressure and be negative for the S&P 500.

Volatility Could Lead to Lower Prices

On the other hand, if the market breaks above the moving averages, it could make a run toward the 4100 level and possibly even the 4200 level if enough momentum builds up. However, the big question here is whether or not the momentum can pick up enough to really get things moving. Currently, the market is characterized by a lot of volatility, and as a general rule, volatility can lead to lower prices over the longer term as traders become spooked out of their positions. The biggest way to avoid this is to make sure that your position size is not overly large, as we will almost certainly see a lot of back and forth in the short term.

The S&P 500 has been experiencing back-and-forth movement during the trading session on Friday, with mixed results from the jobs report. The intentions of the Federal Reserve are clear, and the market is trying to figure out its next move. If the market breaks down, the S&P 500 could look for support at the 3800 level, while breaking above the moving averages could lead to a potential run toward the 4100 and 4200 levels. Overall, the market is characterized by volatility, which could lead to lower prices over the longer term.

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