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Abstract: During the New York session on Monday, U.S. stocks lacked direction, and major stock indexes fluctuated around the opening level after a significant correction last week.

Fundamentals

The three major U.S. stock indexes closed mixed on Monday. The Dow Jones index fell 35.21 points, or 0.1%, to 33,692.22 points. The Standard & Poor's 500 Index rose 4.88 points, or 0.1%, to 4,353.21 points. The Nasdaq index rose 37.06 points, or 0.3%, to 13,529.58 points.

Most major sectors only showed a moderate trend that day, which led to a dull performance of the broader market.

However, biotechnology stocks have fallen sharply, and the Arca Biotechnology Index of the New York Stock Exchange plunged 2.8%.

Pharmaceutical stocks are also obviously weak, which is reflected by the 1.3% drop in the Arca Pharmaceutical Index of the New York Stock Exchange.

Pfizer Inc. (PFE), a pharmaceutical giant, suffered huge losses after it announced that it would stop the clinical development of its experimental obesity and diabetes drug Lotiglipron.

The lack of major U.S. economic data has kept investors on the sidelines, as they expect several important reports to be released later this week. In the next few days, investors will pay close attention to reports on durable goods orders, consumer confidence, new house sales, and sales of houses for sale.

On Friday, the U.S. Department of Commerce will also release a personal income and expenditure report for May. Among them, including the inflation data favored by the Federal Reserve. Consumer price inflation data may seriously affect people's commitment to whether the Fed will honor its interest rate hike expectations.

Market observation: In the first half of this year, the stock market climbed quietly. The S&P 500 index has risen by 13% so far, and the market volatility index has reached a low point never seen before the COVID-19 pandemic. The volatility index VIX of options exchange has fallen to around 14, which is close to the lowest level since February 2020.

However, a few signs, such as the positions in the options market and the sharp fluctuations of some stocks, indicate that market fluctuations are already developing.

The surge in people's interest in artificial intelligence has led to a dazzling surge in the share prices of large technology stocks. According to data from Dow Jones Market Data, since the beginning of this year, this boom has helped the market value of the information technology industry climb by about US$1.9 trillion to over US$10 trillion, accounting for nearly half of this year's market growth.

Option betting on leading technology stocks also extends to other areas of the market, such as small-cap stocks. Therefore, even if the market does not crash, once the stock market begins to decline, it may aggravate the turmoil of the whole market.

Technical Analysis

The Dow Jones Industrial Average currently shows a neutral momentum, indicating that the market lacks a clear direction. The price may continue to fluctuate between the first resistance level 33870 and the first support level 33659.

The first support level, 33659, was defined as overlapping support, which was strengthened by the existence of 50% Fibonacci retracement and 78.6% Fibonacci retracement. In addition, the second support level 33464 is another overlapping support level, which coincides with 61.8% Fibonacci retracement and 145.00% Fibonacci expansion.

On the upside, the first resistance level of 33870 is overlapping resistance, which is further supported by the Fibonacci retracement of 23.6%. In addition, the second resistance level 34283 also acts as overlapping resistance, which coincides with the Fibonacci retracement level of 61.8%.

Overall, the index is slowing down after testing the previous rising point of 33600. If the rising point is strong enough, it will push the price up again and defend its recent increase. However, any increase cannot exceed the previous level of Wave 5 and 34309, otherwise, the downward trend will be invalid. It is recommended to buy low and sell high.

Trading Recommendations

Trading direction: Long

Entry price: 33660

Target price: 34288

Stop loss: 33350

Deadline: 2023-07-11 23:55:00

Support: 33659, 3340, 33464.

Resistance: 33870, 34286, 34309.