Monday, March 25, 2019

DOWJONES - 25 March 2019

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Fundamental Highlights

US equities underwent a dreadful sell-off on Friday as the inversion of a portion of the treasury yield curve inversion signals impending doom for the US economy. The difference between 3-month and 10-year treasury yields turned negative for the first time since the last financial crisis and is a historically reliable indicator for a looming recession due to its implications on bank profitability. The inversion happened two days after the FED concluded its dovish monetary policy meeting and reaffirmed concerns that stemmed from the downgraded economic projections whilst challenging Chairman Powell’s claims of a good domestic economy. In addition, weak manufacturing data from the US and Eurozone highlighted slowing global growth amidst an unresolved Sino-US trade dispute and uncertainty over Brexit. The fundamental outlook weighs on sentiment and put investors back in risk off mode as they await US fourth quarter GDP and PCE data this week to determine direction on the Dow Index while monitoring US-China trade headlines. 

Technical Analysis

The Dow made a decisive drop of 460 points to end at 25502 on Friday. The index formed a lower high at psychological resistance of 26,000 before extending lower to breach the support at 25590 to form a lower low. Moreover the shorter 20-period MA has crossed below the longer 100-period MA confirming the short-term downtrend. A move below 25350 would be needed to suggest further downside pressure and bring into view the support of the 200-day MA at 25160. Alternately, the price would have to trade through resistance at 25590 to indicate presence of buyers. 

Support:25780 / 25650
Resistance: 26000/ 26140

Chart (H4)