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Abstract: U.S. stocks rose sharply on Tuesday after rising sharply in the New York session. Major stock indexes have steadily climbed to positive areas, partially offsetting the recent weakness.

Fundamentals

On Tuesday, the three major U.S. stock indexes all hit intraday highs. The Nasdaq index, dominated by technology stocks, rose 179.95 points, or 1.4%, to 13,515.72 points. The Standard & Poor's 500 Index rose 40.70 points, or 0.9%, to 4,369.52 points. The Dow rose 194.28 points, or 0.6%, to 33,908.99.

The strength of Wall Street partly reflects the optimism that the U.S. economy will avoid recession after several optimistic reports are released.

According to a report released by the U.S. Department of Commerce, new orders for durable goods made in the U.S. unexpectedly surged in May.

According to the report, after the upward revision of 1.2% in April, durable goods orders surged by 1.7% in May. The market had expected durable goods orders to drop by 1.0%, compared with the growth reported last month of 1.1%. Excluding the impact of the surge in transportation equipment orders, durable goods orders increased by 0.6% in May after being revised by 0.6% in April.

Compared with the decrease of 0.2% reported last month, it is expected that pre-shipment orders will decrease slightly by 0.1%.

Another Department of Commerce unexpectedly showed that the sales of new houses in the U.S. increased significantly in May. According to the report, the sales volume of new houses surged by 12.2% in May, reaching an annual rate of 763,000 units, and the revised annual rate in April increased by 3.5% to 680,000 units. The market had expected new house sales to drop by 1.2% to 675,000 units from 683,000 units originally reported last month. With the surge of accidents, the sales volume of new houses has reached the highest level since it reached 773,000 units in February 2022.

Another report released by the Conference Board shows that consumer confidence in the U.S. improved significantly in June. The Conference Board said that the consumer confidence index jumped to 109.7 in June from the revised 102.5 in May. The market had expected the index to rise to 103.7 from 102.3 originally reported last month.

Nevertheless, we believe that the U.S. economy will fall into a downturn in the fourth quarter, followed by economic contraction.

Although some economic sectors have remained flexible so far, the risk balance shows that the risk of recession is high at present; Europe lags behind the U.S., but the macro trajectory is generally the same. Because the warning of recession in many economies is a "red light flashing", fiscal and monetary policies are out of sync with the stock and bond markets.

The silver lining is that we expect high inflation to slow down relatively quickly. This will create opportunities for policymakers to cut interest rates. The threat of raising interest rates in the future seems to put much greater pressure on Nasdaq growth stocks, rather than blue-chip stocks in the Dow Jones index.

Technical Analysis

The Dow Jones Industrial Average is currently showing an overall bullish trend. The factor contributing to this momentum is that the price further falls to the first support level in a short period, and then rebounds and breaks through the first resistance level.

The first support level is 33,870. Because it is at the overlapping support level, a further increase is considered to be reliable. The second support level is 33,659, which is considered to be beneficial for bulls to rise further because it is an overlapping support level, which is located in the 50% Fibonacci retracement.

From the resistance level, the first resistance is located at 34,283, which is the overlapping resistance, and is located at 61.80% Fibonacci retracement. The second resistance level is 34,534, which is famous for its higher swing resistance.

The previous bearish correction is underway as the Dow Jones Industrial Average breaks above its downtrend line. It is expected that it will continue to rise to our target of 34,288 in the later period. It is recommended to buy the dips. (We think this is an upward revision, and it is also the last carnival before the plunge.)

Trading Recommendations

Trading direction: Long

Entry price: 33926

Target price: 34288

Stop loss: 33350

Deadline: 2023-07-12 23:55:00

Support: 33659, 33406, 33464

Resistance: 33870, 34286, 34309