Tech's rally provided strong support to SP500 and NASDAQ.
SP500 tested new highs, supported by strong demand for tech stocks and encouraging PMI reports. Manufacturing PMI increased from 47.9 in December to 50.3 in January, compared to analyst consensus of 47.9. Numbers above 50 show expansion. Services PMI improved from 51.4 to 52.9, compared to analyst consensus of 51. The reports highlighted the strength of the U.S. economy. At this point, it looks that traders are not worried that strong economic data will provide Fed with an opportunity to keep rates at high levels to fight inflation. The market is focused on AI hype and the general strength of the economy, which is bullish for stocks.
Traders should note that RSI remains in the overbought territory, so the risks of a pullback are increasing.
NASDAQ tested new highs as Netflix rallied 12% after the release of the earnings report. NVIDIA and Advanced Micro Devices were among the best performers in the NASDAQ index today as demand for AI-releated stocks remained strong.
NASDAQ remains overbought, which is not surprising as the index tests historic highs. The nearest support level for NASDAQ is located in the 17,450 – 17,500 range. A move below 17,450 may boost traders’ desire to take some profits off the table after the rally.
Dow Jones is mostly flat despite the broad rally in the equity markets. The pullback in Healthcare and Consumer Defensive stocks puts pressure on the Dow Jones index today.
In case Dow Jones settles below the 37,900 level, it will head towards the nearest support at 37,750 – 37,800.
For a look at all of today’s economic events, check out our economic calendar.
Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.