Dow Jones Pushes Higher as Risk Appetite Improves, Inflation Data Key

The US stock market rose in value for a third consecutive day, with the NASDAQ witnessing the highest gains. The NASDAQ, SNP500 and Dow Jones saw strong bullish impulse waves in the first half of the session but retraced after that. The price of three indices are now trading within a price range and are likely to continue until the US producer inflation level is confirmed. Throughout the day, investors will concentrate on the Producer Price Index and the Federal Open Market Committee’s Meeting Minutes. 

If inflation reads as expected, market participants will likely desire a pause in the hiking cycle in November and December. This is due to the significantly higher levels of bond yields, which already are pressuring the trading markets. This has already been mentioned by members of the FOMC, such as Mrs. Daly. Investors will be closely scrutinizing the Minutes of the Meeting to obtain further indications and clarity. Currently, the CME FedWatch Tool indicates a 15.7% chance of a rate hike in November and 29.5% in December. If the possibility of a hike increases, the stock market can experience pressure again. 

Crude & Brent Oil 

A positive factor for the stock market is the decline in bond yields, the upcoming earnings season and the lower price of Crude Oil. However, economists have advised the price of oil would need to decline below $70 in order to support the global economy. The conflict between Israel and Palestine has not yet significantly influenced oil prices and has only triggered a slight increase. If events develop favourably, the risk of the disruption of oil supplies from the region ease and prices will begin to adjust downward to the previous price. 

However, US government members are already discussing imposing new sanctions against Iran if evidence of its direct support for Hamas is discovered. If sanctions are imposed, and rumours escalate, the price of oil can rise again. If oil prices rise, the stock market can experience further pressure, while the Canadian Dollar or energy stocks can witness an improved outlook. Investors should also note that the PPI and Meeting Minutes this afternoon can influence Oil's price movement. Data which supports a pause will support the price of Oil. 

Crude Oil 4-Hour Chart on October 11th

XAU/USD

The price of Gold is increasing in value this morning but is forming a price rejection candlestick at the previous resistance level. This does not necessarily mean the instrument will not increase. However, traders are likely to switch to smaller timeframes to ensure they are entering at points where momentum is gaining. The US Dollar Index is trading slightly lower than the market open, which is positive for the price of Gold. The US Dollar Index is trading at 105.77; if the price declines below 105.70, the price of Gold will be supported. However, if the index rises above 105.90, Gold can see moderate decreases. 

When looking at trading signals from Trading Central and other analytical companies such as Claws and Horns, the price of Gold is obtaining buy signals. However, the price must rise above the current resistance level at $1,865.28 for buy signals to materialise. If momentum is gained and crosses above this level, the price will also stabilise above the 100-bar EMA on the 2-hour chart, indicating buyers are gaining control. 

What dangers lie for investors speculating a bullish trend? The main factors which could influence a further downward price movement are today’s producer inflation and tomorrow’s consumer inflation. Investors want to see inflation stabilise, allowing the federal fund rate to remain unchanged throughout the rest of 2023. In addition, if tension in the Middle East does escalate further, further investors may opt to invest in Gold rather than the Dollar and Bond yields, particularly if bond yields continue to correct as they have over the past 24 hours. 

XAU/USD 15-Minutes Chart on October 11th

Dow Jones

The Dow Jones rose in value by 0.40% by the end of the US Session and by 0.83% before the instrument retreated. The price movement is as indicated in the market analysis blog the day before and during yesterday’s VIP webinar. The Dow Jones is witnessing higher buy orders during this morning’s session and the past five 10-minute candlesticks. Earlier in the today’s session, the instrument was seeing 80,000 more buy orders. However, cumulative delta is now indicating a equal amount of buy and sell orders. 

Dow Jones 15-Minute Chart on October 11th

Another positive factor is the rise in risk appetite throughout the global economy. European indices have risen in value this morning, as have Asian indices. The DAX has risen 0.35% since the European Cash Open, and the NIKKEI 225 has risen 0.41%. This is deemed to be another indication of bullish price movement. However, traders and investors should note that the price will largely depend on today’s Producer Price Index. 

Analysts expect the PPI to read 0.3% and the Core PPI to read 0.2%. If the data reads as expected or lower, the Dow Jones is potentially likely to attempt a further upward correction to previous price ranges. This can provide opportunities to speculate on a price increase. However, the index can witness significant declines if the PPI reads more than 0.4%. 

From the 30 components within the Dow Jones, 17 stocks rose in value, which is the minimum to obtain buy signals. For solid buy signals, investors would like to see 20+ stocks to be in the green. The best-performing stock was Boeing, Coca-Cola and 3M Co. Boeing rose 2.67% and Coca-Cola 2.17%. However, investors are concerned that the stock with the highest weight, UnitedHealth Group, declined by 0.43%. UnitedHealth Group will publish their Quarterly Earnings Report on Friday, which is potentially why the stock is experiencing a slight decline. For strong buy signals, investors will ideally like to see the stocks with the highest weight,  UnitedHealth Group, Goldman Sachs and Microsoft, in the “green”.

Summary:

• The price of Gold improved and increased in value during this morning’s Asian session. Political tensions, lower bond yields and a weaker Dollar support gold.
• European indices have risen in value this morning, as have Asian indices. The DAX has risen 0.35% since the European Cash Open, and the NIKKEI 225 has risen 0.41%.
• From the 30 components, 17 stocks rose in value, which is the minimum to obtain buy signals.  The best-performing stock was Boeing, Coca-Cola, and 3M Co. Boeing rose 2.67% and Coca-Cola 2.17%
• The future performance of stocks and assets correlated with the Dollar will depend on today's and tomorrow’s inflation data.