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Nasdaq jumps out of bear market; Dow Jones breaks through key trend line following FOMC announcement

The US stock market welcomed the ‘no surprise’ rate hike even though the central bank also cut economic growth forecasts (GDP) from 4.0% to 2.8% and raised its inflation estimates.

The guessing game for the FOMC’s March meeting is finally over. As expected, the US Federal Reserve raised interest rates by 25 basis points and signalled hikes at all six remaining meetings this year.

It was the first increase since 2018 and more importantly, concluded the quantitative easing of the monetary policy to boost the economy from the pandemic since two years ago.

The US stock market welcomed the ‘no surprise’ rate hike even though the central bank also cut economic growth forecasts (GDP) from 4.0% to 2.8% and raised its inflation estimates. Based on Fed Chairman Jerome Powell’s view, inflation is expected to remain well above the Fed’s 2-3% target at around 4.1% throughout this year, and peak in the second half of 2022 as supply chain interruptions play out.

The S&P 500 finished up 2.2 per cent while the Nasdaq jumped 3.8 per cent and the Dow Jones soared by 2.27%.

Nasdaq

The beleaguered Nasdaq has enjoyed a rally session following FOMC’s announcement. A 3.8% lift has helped the index to jump out from the bear market territory and close above the descending trend line since the start of the year. A similar notable breaking-through can also be found from the weekly chart.

Looking ahead to the previous trend line, it now pivots to the support for the tech-heavy index. The near-term target is looking at the 50-days moving average before challenging the Feb high at 15278. In between that, the 50 weekly moving average sits around 15000 could be another pressure line to keep a close eye on.

Momentum-wise, daily and weekly RSI are suggesting a return of risk-appetite with both indicators pointing to the north from the territory of ‘oversold to neutral’.

NASDAQ DAILY

NASDAQ WEEKLY

Dow Jones

Dow Jones rallied 2.27% higher and finished the session out of the correction zone, the most significant jump in three weeks. The index is now trading at only 8% below its historic high.

The downturn trendline for the last four weeks has been breached and along with the new upward trend has been formed to provide future support. Imminent resistance can be found from the 50-days moving average, coinciding with the February low. The 100-days moving average can be viewed as the next pressure level is around 34963, which, if broken through, could safely claim an overturn for the Dow Jones.

From a mid-term perspective, the weekly chart shows that the index remains stuck to its downturn trajectory under the pressure from the ceiling. Only a close above the level of 34321 by the end of this trading week could cement the bull-biased view.

DOW JONES DAILY

DOW JONES WEEKLY

Follow Hebe Chen on Twitter @BifeiChen

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