Thursday, September 12, 2019



Fundamental Highlights

US indices traded sharply higher on Wednesday as rising treasury yields reflect improving market sentiment that predominantly relies on trade developments. As a result, news that China would exempt certain US products from its retaliatory tariffs provided global markets with support. Today, President Trump announced he would delay tariffs on China as a “gesture of good will” offering markets a semblance of easing tensions and further bullish support. Separately on economic data, core PPI figures rose above expectations while the PPI rose by 1.8% on annual basis and remains below the central bank’s target of 2%. Today the US publishes CPI data which should do little to change market expectations of looser monetary policy from the FED. Apart from the data, market participants should draw attention to today’s ECB monetary policy meeting which is expected to deliver a rate cut and measures of quantitative easing. Anything short of market expectations should limit the Dow’s potential to advance higher.

Technical Analysis

The Dow posted its 6th consecutive gain as it added 227 points to end at 27137 on Wednesday. There is a The price is now trading within record high territory and depending on today’s ECB policy meeting , the Dow may advance beyond the highest resistance at 27390. There is a support trend line on the Dow’s sequence of higher lows that corresponds with that of the RSI. Given that the RSI reading is within the overbought territory, we may see it ease to the support trend line to indicate a short-term pullback on the Dow’s uptrend. Look for a sustained move above 27250 to maintain buying pressure and lead the Dow to test the main top at 27390. On the other hand, a move below 27070 would indicate selling pressure while a sustained decline below the 27000 level near the 20-period MA coupled with a break of the RSI trend line would indicate a deeper pullback.

Support: 27070/ 27000
Resistance: 27320/ 27390

Chart (H4)