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Summary: U.S. stocks rose in early trading Thursday and traded largely higher during the session. The Nasdaq showed strong gains, reflecting the strength of the technology sector.

Fundamentals

The Nasdaq hit a new intraday high in recent trading and is now up 218.01 points, or 1.8%, to close at 12,702.17. The S&P 500 rose 37.50 points, or 0.9%, to close at 4,152.74, while the DJIA bucked the trend by falling 45.15 points, or 0.1%, to close at 32,754.77.

Wall Street's rally partly reflected a positive reaction to Nvidia's (NVDA) earnings news, with the chipmaker's shares surging 26.8% to a record intraday high.

Nvidia reported better-than-expected fiscal fourth-quarter results and forecast fiscal second-quarter revenue well above market expectations.

The news has contributed to a rally in semiconductor stocks, resulting in a 6.4% surge in the Philadelphia Semiconductor Index. The index has reached its best intraday level in over a year.

However, industrial giant Intel (INTC) bucked the trend by falling 6.2%, dragging the DJIA down slightly.

Software and computer hardware stocks were strong, driving the NYSE Arca Computer Hardware Index and the Dow Jones U.S. Software Index up 3.5% and 3.1%, respectively.

On the other hand, energy stocks fell sharply on the day, as plummeting crude oil prices put pressure on the sector. With crude for July delivery plunging $2.65 to $71.69 a barrel, the Philadelphia Oil Service Index fell 2.3% and the NYSE Arca Oil Index dropped 2.1%.

While the risk of renewed oil price weakness is currently very strong, this risk is increasingly driven by speculators rather than due to fundamentals. Meanwhile, traders are closely monitoring any developments in the U.S. debt ceiling negotiations as fears of a potential default linger.

The lack of a solution to the U.S. debt ceiling issue and the recurrence of hawkish comments from the Fed could trigger specific reflexive selling in the oil market and retest recent lows. However, we believe that this scenario is unlikely to occur or last for an extended period. This is due to robust demand growth this year, the commitment of OPEC+ to tighten the market, and the recovery of demand in Asia. We expect oil to trade within the range of $90 per barrel in the second half of the year.

Among global equity markets, Asian markets were largely bullish on Friday. However, there remains the possibility that U.S. debt ceiling negotiations could break down by the end of the week or end up with a tougher-than-expected government spending cut package that could dampen global economic growth. Asian assets are particularly vulnerable, as they will be the first to react to agreements of any nature when the market opens on Monday. Coincidentally, next Monday is a U.S. public holiday, and U.S. stock markets are closed for the day.

Republican and White House negotiators are closing in on a deal to raise the debt ceiling while setting a two-year limit on federal spending for now, according to insider sources. The sources state that the two sides have narrowed their differences in recent days during the negotiations, although the details agreed upon are tentative and a final deal remains elusive. Additionally, there is still no consensus on the specific amount for the ceiling.

Technical Analysis

The Dow Jones Industrial Average closed down a modest 45.15 points, indicating bearish pressure at the market's opening. However, after five consecutive trading days of losses, the week's closing is expected to narrow the losses.

The DJIA rebounded quickly after hitting the previously familiar strong support level of 32,500 in yesterday's trading, suggesting that short-term prices may be favorable for both bulls and bears (although the bears did not reach the expected target level of 32,489).

In terms of momentum indicators, the RSI is oversold in the 4-hour time frame, and the MACD has strengthened upward below its 0-axis, both reflecting improved sentiment. However, a downward death cross is formed in the daily time frame. If the bulls decide to ignore the mixed technical signals, they are likely to push prices further up to the 100-day SMA level, bringing prices back to the mean and setting the stage for the next move higher.

Overall, the DJIA bulls are poised for an overwhelming adjustment to the upside. The bears, meanwhile, appear ready to use these signals to reach their desired targets, but a decisive decline is needed to reverse the medium-term bullish trend. In terms of trading strategy, buying the dips is recommended.

Trading Recommendations

Trading Direction: Long

Entry Price: 32764

Target Price: 33311

Stop Loss: 32240

Valid Until: 2022-06-09 23:55:00

Support: 32570, 32489, 32330

Resistance: 32860, 32900, 33150