US indices ended lower on Monday as trade optimism fluctuated amidst conflicting US-China trade headlines. It was confirmed however that the two nations would begin high-level trade negotiations on Thursday and markets should expect trade news to remain a catalyst for price action ahead of the scheduled talks. It is worth nothing that time has proved that the US and China’s relationship is unpredictable. Therefore, until we see fundamental changes underway, trade headlines won’t indicate much but rather swiftly play with market sentiment. What market participants are relying on to buoy US equities is the Fed’s disposition towards an easier monetary policy as economic data raises concerns over the domestic economy burdened by the US-China trade war. Today, the US publishes PPI data which is expected to maintain rate cut expectations while markets will seek hints on monetary policy as Fed Chairman Powell is scheduled to speak later today.
The Dow traded sideways before ending lower by 95 points at 26478 on Monday. The index it ranged between the support at 26350 and the resistance at 25560 which it briefly breached as it tagged the 26620 level. Look for price to show a sustained move above 26560 to indicate buying pressure while taking out the high at 26620 would be required to target the higher resistance at 26660 and 26700. Failure to show a sustained move above the resistance provided by the 50-period MA at 26560 would leave the Dow in range mode until a break below 26350 signals a retreat to target the lower support levels at 26260 and 26130.
Support: 26350/ 26260
Resistance: 26560/ 26660