US indices traded lower on Monday as markets lower expectations for an imminent rate cut following Friday’s strong jobs report. While the data signals a healthy labor market which would normally uplift sentiment, it challenges the prospect of looser monetary policy from the Fed which had largely contributed to the stock market’s strength. There are no major economic releases for the day, however Fed Chairman Powell alongside other Fed members is scheduled to speak and markets will watch closely for future policy clues in response to the latest jobs data. We may see the Dow Index exhibit sideways price action before markets establish new monetary policy expectations based on Powell’s remarks in tomorrow’s semi-annual testimony.
The Dow Index extended losses to end 0.43% lower at 26806 on Monday. The price traded well below the ascending trend line before consolidating above the support at 26720. Today, Futures are pointing lower as the price traded through the support of 26720 indicating momentum has shifted to the downside. Look to the 100-period MA around 26660 to provide the next level of support from which buyers could come in and drive the Dow higher where it could meet the resistance coinciding with the 50-period MA at 26765. So long as price holds below the 26830 resistance, the bearish bias will hold and the Dow will be vulnerable to further weakness.
Support: 26660/ 26600