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Abstract: US stocks closed higher on Monday, with the Dow outperforming other major averages in slightly subdued trading.

Fundamentals

The Dow held up in Monday's trading, and the S&P 500 began to fall around noon and then resumed moving higher, while the NASDAQ was in the falling range for most of the session. At the close, the Dow was up 209.52 bps, or 0.62%, at 33,944.40. The S&P 500 rose 10.58 bps, or 0.24%, to 4409.53. The NASDAQ rose 24.77 bps, or 0.18%, to 13,685.48.

Traders were largely reluctant to take major action ahead of the release of the consumer and producer price inflation report, which the market closely watched later on Wednesday.

Following the mixed monthly jobs report last week, inflation data could have a considerable impact on the interest rate outlook. The market now expects annual growth in core consumer prices, excluding food and energy prices, to slow from 5.3% to 5.0%. Ahead of the inflation data, CME Group's Fed Watch tool showed a 92.4% chance of another 25 bps rate hike at the next Fed meeting later this month.

Investors should also pay attention to the earnings reports of financial industry giants such as BlackRock, JPMorgan Chase, Wells Fargo, and Citibank this week. As the second-quarter earnings report approaches, some previously underperforming sectors, including healthcare and financials, are gaining traction among investors.

Large asset managers such as BlackRock and Wells Fargo emphasized their focus on the healthcare sector in their recent outlook for the rest of the year.

Bank of America Global said global fund managers increased their allocations to health care and banking stocks by about 5% in June while cutting their usual holdings in recession-era assets such as cash and consumer staples.

Deutsche Bank strategists said earnings seasons over the past 10 years have generally been positive for stocks. However, 55% of MLIV Pulse's 346 respondents said the upcoming earnings season would be bearish for stocks.

Technical Analysis

The Dow Jones Industrial Average has seen a sharp correction after hitting the range high in mid-June at the beginning of the month, which is now pausing its downtrend above the 33,600 range. With further correction in the market, the index is now showing signs of continuing to test its previous highs.

At the same time, the RSI and MACD have confirmed the fact that they are constantly raising at lower highs, showing bullish signals that are in sync with the market trend. The stochastic oscillator also shows signs of improvement, indicating more upside in the future.

While the technical signals are reassuring, it seems likely that the index may not be able to continue rising due to the overcrowded time period. It means that oscillation will come back and forth, but this reversal will be corrective and will not trigger a further break below the previous low of the 33600 range. Therefore, investors are advised to go long at lows.

Trading Recommendations

Trading Direction: Long

Entry Price: 33800

Target Price: 34566

Stop Loss: 33400

Valid until: 2023-07-25 23:55:00

Support: 33766/33695/33616

Resistance: 34038/34316/34473