US Market Outlook: Bourses hold gains

The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite indices concluded the week on an upward trajectory. The Dow Jones had broken its five-week slump and rebounded last week. The S&P 500 and NASDAQ Composite were up for four consecutive weeks. The Dow Jones appears weak on the charts, whereas the S&P 500 and NASDAQ Composite have the potential to climb further.

The prolonged decline since August remains intact. The recent bounce is merely a correction within that trend. A sustained rise from here could see the Dow Jones reaching 52,200 and 52,500 in a week or two. However, surpassing 52,500 is less probable. There is a high chance of the index reversing lower between the 52,200-52,500 resistance zone, which could drag the Dow Jones down to 50,000-49,500 in the coming weeks.

A robust break above 52,500 is essential to avoid this decline and proceed towards 54,000. That requires a significant positive trigger. The sharp rebound from the low of 7,731.26 suggests strong buying interest at lower levels. Immediate support is at 7,785. Below that, 7,750-7,730 is the next critical support zone. The short-term outlook becomes negative only if the index breaks below 7,730.

If it does, a fall to 7,700-7,670 can be expected. However, such a drop seems less likely at the moment. The overall market sentiment remains positive. The S&P 500 could rise to 8,100-8,200. Following this rise, a corrective fall to 7,800 is plausible. The index peaked at 27,722.75 and has since declined. Immediate resistance lies at 27,500.

If it fails to breach this level, the NASDAQ Composite index could drop to 26,900 or 26,700 in the short term. A steady rise above 27,500 is necessary to bolster the case for the index reaching 28,300-28,500. The 28,300-28,500 range is a formidable resistance zone that could halt the upward movement. We anticipate the NASDAQ Composite index to reverse lower from this resistance level and fall to 27,000 or even lower.

Thus, we emphasize exercising caution as the index ascends above 28,000. The dollar index (102.25) remained stable last week, fluctuating between 101.75 and 102.55. The outlook remains bullish. A strong break above 102.55 could propel the dollar index higher to 103.50 in the coming weeks. Conversely, if the index breaks below 101.75, a corrective fall to 101.30-101 can be expected first.

Subsequently, a rise can begin, targeting 103.50 on the upside. The dollar index must fall below 101 to make the outlook negative. Only then will a fall to 100 and lower become feasible. However, that appears less likely, with strong support in the 101.30-101 range. The US 10Yr Treasury Yield (5.24 per cent) is finding it challenging to sustain a rise above 5.35 per cent.

Nevertheless, the outlook remains bullish. The upside remains open for a rise to 5.6 per cent. In the long term, the US 10Yr Treasury Yield could reach 6 per cent. It remains to be seen whether this rise can occur now or after a corrective fall. Immediate support is at 5.2 per cent. A breach below this level could push the yield down to 5.15 per cent.

Failing to recover from around 5.15 per cent could drive the yield down to 5 per cent. However, a drop below 5 per cent is unlikely. As long as the US 10Yr Treasury Yield remains above 5 per cent, the bullish outlook will persist.