Dow Jones rebounds as market sentiment shifts towards buying opportunities

IG

The Dow Jones Industrial Average broke its streak of nine consecutive down sessions, rising by 0.04% on Thursday following a significant drop of over 2.5% the previous day. This decline was influenced by hawkish comments from the Federal Reserve, which revised its interest rate cut forecasts for next year from four to two.

As a result, Wall Street equities experienced a broader decline. Currently, a small percentage of Russell 3000 stocks (15%) are above their 20-session moving average, a level not seen since April. Additionally, only 34% of NYSE stocks have finished higher on average over the last ten sessions, marking a low not reached since September 2022.

Market participants are closely watching the US PCE price index, with expectations of stable forecasts. The next significant market catalyst is anticipated to be the monthly US employment reports, which are due in early January. In the meantime, a technical rebound in the Dow Jones is expected, with suggested buy entries above 42,000 points. The target is set at 44,000 points, and a stop is placed at 41,500 points, indicating a favorable risk/reward ratio of 4.

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