Dow Jones Industrial Average (DJIA)

• U.S. stock indexes rose for the second consecutive week, with the S&P 500 hitting a record high and the Dow and NASDAQ gaining over 1.6%, driven by President Trump's pro-growth initiatives, including a proposed USD500b AI infrastructure investment, and the lack of new tariff announcements. 4QCY24 earnings expectations improved slightly, with S&P 500 net income projected to grow 12.7% YoY, marking the highest quarterly growth in three years, according to FactSet. U.S. crude oil prices fell over 3% to $74 per barrel but remained up 5% YTD, while Bitcoin hit an all-time high above USD109,000 on optimism about a crypto-friendly administration. Globally, Japan's rate hike to 0.50% (from 0.25%) on Friday could raise concerns over the potential unwinding of yen carry trades, though its impact on equity markets remained subdued compared to August's hike.
• Looking ahead, heightened market volatility is expected this week as the market focuses on the Fed's interest rate decision on Wednesday, while waiting for policy updates from the Trump administration. The probability that the rates will remain unchanged has risen to 97.9% from 89.3% a month ago, though Fed Chair Powell's comments could move markets. Other key events include Thursday's initial 4Q GDP estimate, expected to confirm continued solid growth (3.1% in 3Q, 2.0% in 2Q), and Friday's PCE Price Index, which is the Fed's preferred inflation gauge. Investors will also closely monitor mega-cap tech earnings, with Microsoft and Meta reporting on Wednesday and Apple on Thursday. While a "sell on the news" reaction is possible given recent rallies, strong guidance or a meaningful pullback in yields could push stocks toward all-time highs.
• Technically, the DJIA closed firmly above its 5-week and 13-week SMAs, indicating that the medium-term uptrend remains intact. Weekly stochastic and RSI indicators signal potential for continued recovery, but caution is warranted as the SmartMCDX index approaches the 15-level threshold, historically associated with sell-offs. Its daily chart, however, suggested otherwise, where stochastic indicator already in the overbought territory at 97 level with K about crossing below the D line, indicated that a short-term pullback may be on the horizon.
• In short, elevated market volatility is likely to persist this week, with a downward bias. Key support levels are at 43,360 (5-week SMA) and 42,509 (13-week SMA), while resistance levels are at 44,565 and 45,071.

Source: Kenanga Research - 27 Jan 2025