NASDAQ Index, SP500, Dow Jones Forecasts – NASDAQ Moves Higher As Inflation Rate Drops To 2.4%

SP500 Tests Resistance At 6870 – 6880

SP500 gains ground as traders react to CPI report. The report indicated that Inflation Rate decreased from 2.7% in December to 2.4% in January, while analysts expected that it would drop to 2.5%.

Falling energy prices, as well as lower prices on used cars and trucks served as key catalysts that pushed inflation lower.

Core Inflation Rate declined from 2.6% in December to 2.5% in January, in line with analyst estimates.

Not surprisingly, Treasury yields moved lower after the release of CPI report. Bond traders bet that Fed may cut rates as inflation is slowing down.

The yield of 2-year Treasuries moved towards the 4.42% level, while the yield of 10-year Treasuries settled near 4.06%.

Falling Treasury yields provided material support to yield-sensitive sectors of the market. Utilities and Real Estate stocks were among the biggest gainers today.

Today’s move was extremely broad, and all market segments managed to gain ground in today’s trading session.

Basic materials stocks have also gained upside momentum as traders reacted to the rally in precious metals markets.

Importantly, tech stocks failed to gain strong momentum. It remains to be seen whether relative weakness of tech stocks shows that the market is not ready for a strong move.

Currently, SP500 is trying to settle above the nearest resistance at 6870 – 6880. In case this attempt is successful, SP500 will head towards the 50 MA at 6908. In case SP500 climbs above the 50 MA, it will head towards the resistance at 6940 – 6950.

NASDAQ Moves Higher After CPI Report

NASDAQ gained some ground as traders focused on inflation data. Strategy, which was up by 9.4%, was the biggest gainer in the NASDAQ index today.

The stock moved higher as Bitcoin climbed towards the $69,000 level. Dovish changes in Fed policy outlook are bullish for crypto and Strategy, which holds a significant amount of Bitcoin on its balance sheet.

NVIDIA, Apple, and Alphabet were among the losers in the NASDAQ index. Some analysts would point to sector rotation, but I’d note that a pullback in key names on a bullish day is a bearish sign.

Tech leaders are too big to ignore, and the market needs them to move higher to test historic highs. In case big tech remains under pressure, NASDAQ will not be able to gain sustainable upside momentum.

NASDAQ settled above the support at 24,700 – 24,750 and is trying to settle above the 24,900 level. If NASDAQ manages to settle above this level, it will head towards the 50 MA at 25,035. A move above the 50 MA will push NASDAQ towards the resistance at 25,200 – 25,250.

Dow Jones Rebounds After Pullback

Dow Jones has also moved higher, supported by CPI data. Nike, which was up by 3.6%, was the biggest gainer in the Dow Jones index today.

It should be noted that Dow Jones failed to gain strong momentum as traders remained cautious.

From a big picture point of view, traders are not sure whether falling inflation will force the Fed to cut rates at the next meeting.

Currently, Dow Jones is trying to settle above the nearest resistance level, which is located in the 49,500 – 49,550 range. If Dow Jones settles above the 49,550 level, it will move towards the next resistance at 50,100 – 50,200. RSI is in the moderate territory, and there is plenty of room to gain momentum in case the right catalysts emerge.

On the support side, a move below the 49,200 level will push Dow Jones towards the support at 48,700 – 48,800.

For a look at all of today’s economic events, check out our economic calendar.