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Summary: Stocks were mostly higher in Wednesday trading, extending the upward trend seen earlier in the week. As the Nasdaq and S&P 500 continued to rise, the indexes ended with their best closes in more than a year.

Fundamentals

The tech-heavy Nasdaq rose 158.26 points or 1.2% to 13,918.96, while the S&P 500 increased by 32.90 points or 0.7% to 4,472.16. The Dow Jones Industrial Average (DJIA) experienced a significant pullback from its intraday high but still climbed 86.01 points or 0.3% to 34,347.43.

Wall Street remained strong following the highly anticipated June inflation report released by the U.S. Department of Labor, which showed consumer price growth lower than expected.

The Labor Department stated that the Consumer Price Index (CPI) rose by 0.2% in June, following a slight increase of 0.1% in May. Market expectations were for a 0.3% increase in consumer prices. Excluding food and energy prices, the core CPI rose by 0.2% in June, following a 0.4% increase in May.

The report also revealed that the year-on-year consumer price growth rate slowed down from 4.0% in May to 3.0% in June, with market expectations of a slowdown to 3.1%. The year-on-year growth rate for core consumer prices also decreased from 5.3% in May to 4.8%. Market expectations were for a slowdown to 5.0%.

Despite the anticipation of another 25-basis-point interest rate hike by the Fed later this month, the data from the report reignited market optimism, suggesting that the Fed's rate-hiking cycle may come to an end.

However, it is likely that the 25-basis-point rate hike this month is already a foregone conclusion, and this report does not change that. It adds more weight to the dovish argument, indicating a potential pause in rate hikes in September and the possibility of ending the year's rate increases.

In the meantime, the market will face a lot of economic data leading up to the September meeting, not to mention the November meeting, which is likely to be the next "live" meeting after July. However, increasing evidence suggests that the Fed will enter an observation mode after the rate hike later this month.

Overall, the U.S. June inflation data fell below expectations, marking a smooth end to the first half of the year's inflation process. However, we anticipate that the fading base effect in the second half of the year will result in sticky year-on-year readings for CPI, with a potential rebound in July and subsequent fluctuations around the 3% level. Whether there will be further rate hikes after September will depend on the trends in subsequent employment and inflation data on a month-on-month basis. We expect the Fed to maintain a hawkish stance throughout the year and refrain from cutting rates. The rebound in U.S. stocks is expected to continue until expectations of a recession heat up, at which point a downward trend may ensue.

Technical Analysis

The DJIA reached a new high for 2023 in yesterday's trading and continues to show bullish momentum. The bulls may continue to move towards the previous resistance level at 34,713.

In yesterday's trading, prices surged strongly but faced pressure from being too close to the first major resistance level, limiting further upside. Based on the retracement structure after yesterday's rise, it is expected that the bulls will continue to move higher but not break above the previous high at 34,713 to maintain the rhythm of a wide-range oscillation within the range.

The first support level is located at 34,290, representing overlapping support levels aligned with the 38.20% Fibonacci retracement. The second support level is at 33,880, considered a strong support level. It represents overlapping support levels aligned with a 78.60% Fibonacci retracement and a 78.60% Fibonacci projection level.

The first resistance level on the upside is at 34,616, which is considered important due to its role as a multi-wave resistance level. The second resistance level is at 34,713, positioned at the 127.20% Fibonacci extension, and a breakout above it would disrupt the wide-range oscillation pattern. This level should be closely watched. In terms of trading strategy, it's recommended to buy low and sell high.

Trading Recommendations

Trading Direction: Long

Entry Price: 34350

Target Price: 34713

Stop Loss: 34000

Valid Until: 2023-07-27 23:55:00

Support: 34290, 34132, 33880

Resistance: 34616, 34713, 35041