Monday, September 23, 2019



Fundamental Highlights

US indices traded lower on Friday at the back of disappointing US-China trade news. The Dow initially traded higher on positive sentiment towards US-China trade negotiations before hopes of trade progress regressed as Chinese officials cancelled US farm visits after President Trump stated that he wouldn’t settle for a partial deal. This highlights markets’ sensitivity towards the trade situation and proves it to be the main driver of price action while monetary policy remains a determining fundamental theme. Trade concessions and tariff exemptions seem to be more of a way of mitigating the negative impacts of the trade war than a signal of progress between the US and China. Thus, the latest developments should remind market participants of the unpredictability of the trade war and to keep cautious of trade headlines. Separately on economic data, the US releases Manufacturing and Services PMI data today. As the Fed expressed its data-dependency in its latest FOMC meeting, traders should look to the figures to impact price action as it determines the outlook on future monetary policy.

Technical Analysis

The Dow dropped by 150 points to end at 26935 as it exited the range held by the horizontal support at 27000 and the index’s record high near 27390. The price broke below the 50-period MA to indicate bearish pressure before it found support below 26900 at 26880. Today, look for a sustained move above 27000 to indicate buying pressure and a trade above the 20-period MA near 27100 to lead the index to higher levels. Failure to trade above 27000 would maintain the bears’ control while a decline below 26880 would lead the Dow towards the lower support at 26800 followed by the 20-day MA at 26720. The RSI reading is now is within the negative territory as it fell below the 50 midline and suggests a bearish-short term bias.

Support: 26880/ 26800
Resistance: 27000/ 27100

Chart (H4)