In recent weeks, the stock market has displayed a bullish trend, with several indexes finally breaking higher. This surge is fueled by speculations that the Federal Reserve (FED) is considering a pause in its hiking cycle.
Adding to the positive sentiment, the US Consumer Price Index (CPI) came in lower than expected, decreasing from 4.7% to 4%, increasing the likelihood of a FED hold in the near future.
During such times, stocks tend to experience easier upward movements. However, it’s important to remember that while dovish times are ideal for higher stock prices, a hold stance from the FED is not necessarily dovish, a fact that is often overlooked.
Taking a closer look at the DJIA, the trend is currently in a recovery mode, indicating potential for further gains. After experiencing an initial correction down to the 61.8% Fibonacci retracement level in March, followed by a five-wave rise, the market underwent another perfect minor A-B-C drop into the 61.8% Fib level. This Fibonacci level demands careful attention, and as of now, we can observe a promising upward turn, with the price edging closer to the critical level of 34276. Achieving daily and weekly closes above this level would open the path for a potential target of 35631.
It’s worth noting that we discussed a bullish view a month ago, and the current market conditions align with our previous analysis.
Twitter: @GregaHorvatFX
The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
