Monday, September 16, 2019



Fundamental Highlights

US indices ended mixed on Friday as the tech sector underperforms while US-China trade developments maintains positive market sentiment. The Dow was the only index to end the week in positive territory as it recorded its 8th consecutive gain. Economic data provided support during the day as consumer sentiment figures beat expectations and US retail sales rose by 0.4% in August suggesting that the economy should remain underpinned by US consumers. On the global trade front, President Trump expressed consideration to reach an interim trade deal while China exempts further US products from tariffs. Given the prolonged uncertainty of the US-China trade war, further positive trade headlines may not be sufficient to drive the Dow to record highs as the two nations have yet to meet and the conflict persists. Moreover, the advancement of US equities will depend on the FOMC meeting this week from which markets are expecting a rate cut. Today, US equities may suffer from downside pressure as attacks on Saudi oil fields aggravate geopolitical tensions. In terms of data, the US publishes the NY Manufacturing Index which may be overlooked as markets draw attention to geopolitical headlines and continue to monitor trade headlines.

Technical Analysis

The Dow added 37 points to end at 27219 on Friday. The index managed to trade above the previous session’s closing price and recorded a new high of 27321. Today, the RSI reading broke the support trend line as price traded below the 20-period MA currently at 27155 and tagged the support at 27000. Look for a sustained move below the 20-period MA to maintain selling pressure with a break below 27000 required to target the support at 26900. It is worth nothing that the Dow’s overall outlook remains bullish as the daily RSI reading maintains a support trend line from August’s main bottom. However, a trade below the confluence of support provided by the ascending trend line from the August 26th low and the 27000 level would signal a retracement period. On the other hand, trading above the 20-period MA and ending above the previous closing price would keep the index within the record high territory where the bulls would attempt to break above the resistance at 27320 to reach the index’s record high near 27390.

Support: 27000/ 26900
Resistance: 27155/ 27320

Chart (H4)