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Abstract: U.S. stocks continued their recent gains in Friday's trading but fell back throughout the trading day. The Nasdaq index and S&P 500 index fell into the negative range.

Fundamentals

The three major U.S. stock indexes closed mixed on Friday. The Dow rose 113.89 points, or 0.3%, to 34,509.03 points. The Nasdaq index fell 24.87 points, or 0.2%, to 14,113.70 points. The Standard & Poor's 500 Index fell 4.62 points, or 0.1%, to 4,505.42.

Although the performance of the day was uneven, the major stock indexes rose sharply in the week of the 14th. The Nasdaq index rose 3.3%, and the S&P 500 index and Dow Jones index rose 2.4% and 2.4% respectively.

The strength of Wall Street reflects, to some extent, the persistent optimism that monetary policy tightening is coming to an end after the recent encouraging inflation data.

Optimistic profit news of financial giants JPMorgan Chase, Wells Fargo, and Citigroup also aroused buying interest.

However, the share prices of JPMorgan Chase and Wells Fargo subsequently fell back to the flat line, and Citigroup's share price was also under pressure, because its profit in the second quarter exceeded analysts' expectations, but fell year-on-year.

After the Nasdaq index and the S&P 500 index rose to their highest levels in more than a year last week, investors seem reluctant to continue buying stocks.

In terms of the U.S. economy, the report released by the Department of Labor shows that the import price dropped slightly in June.

According to the U.S. Department of Labor, import prices fell by 0.2% in June, after a 0.4% decrease after a revision in May. The market had expected the import price to drop slightly by 0.1%, compared with the 0.6% originally reported last month. At the same time, after the export price fell by 1.9% in May, the export price fell by 0.9% in June. Export prices are expected to fall by 0.2%.

Another report released by the University of Michigan shows that the improvement in consumer confidence in July far exceeded expectations.

The report shows that the consumer confidence index soared from 64.4 in June to 72.6 in July. The market had expected the index to rise to 65.5. As the growth rate far exceeded expectations, the consumer confidence index reached its highest level since it hit 72.8 in September 2021.

Overall, this remarkable increase reflects that the resolution of the debt ceiling crisis at the beginning of this month and a more positive view of the slowdown in inflation have restored people's attitudes. However, their views on personal financial situation have not changed, because the continuous high prices and expenses continue to put pressure on consumers.

Technical Analysis

Since its high of 34,589 on December 13, 2022, the Dow Jones Industrial Average has continued to oscillate in a seven-month consolidation range.

The rally from the July 10, 2023 low of 33,714 has been rejected for the third time last Friday, July 14 at the 34,589 range and has converged with a major downtrend line that has capped the prior upward move since the March 29, 2022 high.

The 4-hour Relative Strength Index is signaling a bearish divergence in its overbought zone, suggesting that the upside momentum of the short-term uptrend since the July 10, 2023 low of 33714 may have run out, which in turn adds to the pressure for a sharp retracement.

Investors need to focus on the key intermediate-term key resistance at 34,300 to maintain the short-term bearish bias with near-term support at 34,035. Moreover, another break below the previous low at 34,714 will announce the end of the bulls.

However, if the bears stop and stabilize at 34,035, there is a possibility of a breakout above the 7-month range, with intermediate resistance at 34,589. However, as of now, there is no room for the market to go long. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 34513

Target price: 34035

Stop loss: 34830

Deadline: 2023-07-31 23:55:00

Support: 34308, 34035, 33959

Resistance: 34589, 34908, 35057