Breakneck Rally to Face US Inflation Reality CheckUS Tech 100 IndexPEPPERSTONE:NAS100Batsman-EdwardThe breakneck rally in the US 100 index continued to new record highs last week, after a better than anticipated non-farm payrolls report signaled the US labour market remained resilient in the face of challenges raised by the Iran conflict. The index spiked 2.5% on Friday to close at 29247, led by strong gains in companies like Intel and Nvidia, ensuring the US 100 has notched a gain of over 6% so far in May. This strong rally was despite a sentiment reading amongst US consumers falling to new lows as concerns grew about the impact of inflation on household finances, which could be an early warning of problems that may lie ahead as the psychological 30000 level looms on the horizon. US 100 prices have been subdued to start the new week, initially falling 0.3% to 29143, as President Trump rejected Iran’s latest counter peace proposal as ‘totally unacceptable’ (Bloomberg), before briefly recovering to register a new all time high at 29315 and then edging back to trade flat at 29258 at time of writing (630 BST). Looking forward, while traders may be waiting on fresh updates on whether the gaps between the US-Iran peace proposals can be bridged, leading to the reopening of the Strait of Hormuz, they may also be preparing to assess two critical US inflation readings. The first on Tuesday, when the latest Consumer Price Index (CPI) update is released at 1330 BST, then on Wednesday when the more volatile Producer Price Index (PPI) reading is due at the same time. These updates could help traders to gain a clearer insight into the impact the surge in energy prices is having on inflation in the world’s biggest economy. Any upside surprises could increase market expectations for future Federal Reserve rate hikes, which could weigh on the recent US 100 rally, while in line or below expectation readings may have the opposite effect. Technical Update: Is the Trend Still Your Friend? From the March 31st low at 22774 to this morning’s current high at 29315, the US 100 index has rallied more than 28.50% in just 30 trading days. Across that move, only 6 sessions have closed lower than they opened, producing a red candle. This highlights the persistence of buying pressure and reflects an environment where pullbacks have been shallow, and momentum has remained firmly to the upside. The US 100 index rally indicates positive sentiment amongst traders, with buyers outweighing sellers and no downside shift evident so far. However, the advance has been extended with no corrective phases materialising, which may leave traders questioning whether the trend remains their friend, or whether over‑extended upside conditions may soon need to be unwound. Such a move could introduce a phase of price weakness, even if only corrective in nature. With the risks created by the US inflation readings on the horizon, it may prove useful for traders to identify relevant support and resistance levels to focus on across the coming week. Potential Resistance Levels: The most recent all‑time high is almost always a key resistance focus, as sellers have already shown the ability to cap price strength at that point and may be able to do so again. With that in mind, this morning’s 29315 high may have the potential to act as the first resistance point. How this level is defended on a closing basis could be worth monitoring as a closing break above 29315 might lead to further price strength. If breaks above the 29315 all‑time high are seen in the coming week, the market may register fresh upside extremes as the prevailing uptrend is maintained. To judge where the next resistance may stand in this uncharted environment, applying Fibonacci extension analysis to the last significant correction can be useful. Using that method, the 100% extension at 29661 might then become the next resistance focus for traders. If 29661 were also breached on a closing basis, upside momentum could extend further toward 30968, which is the 138.2% extension. Potential Support Levels: It could be argued that over‑extended upside conditions are evident within the latest rally. If so, prices may be exposed to the risk of a correction. As the chart below shows the first key support could stand at 28395, a level which is equal to the 38.2% Fibonacci retracement of the recent rise. This level may be the initial downside focus should weakness begin to develop. If price weakness is to materialise, closing breaks below 28395 may increase the possibility of a deeper correction developing. Such a move might open scope for further downside toward 27819, which is the 61.8% Fibonacci retracement of the latest advance. If 27819 were also to give way on a closing basis, weakness could then extend toward 27371, which is the current level of the rising Bollinger mid‑average.