US indices traded higher on Monday as risk appetite was buoyed by better than expected Chinese manufacturing data. Optimism over the resumption of US-China trade talks is surely factored into the positive sentiment however remains fragile as a result of incoming trade headlines such as the supposedly false announcement of restricting US investments into Chinese companies which tampered with the positive outlook on the trade situation. In terms of data, the Chicago PMI figure fell into negative territory as it came at 47.1, below the estimate of 50.2. Today, the US publishes ISM manufacturing PMI data for September which is expected to tick higher and impact price action. Apart from the data, traders should continue to monitor US politics and trade developments to influence market sentiment.
The Dow started the week positively as it held above the support at 26800 and gained 96 points to end at 26916. Today, Dow futures are pointing higher and attempting to overcome the resistance at 27000 which would negate September’s sequence of lower highs on the Dow and target the higher resistance at 27100. Failure to break above 27000 would leave the Dow trading sideways within the constraints of the bollinger bands. A sustained move below 26900 is required to indicate selling pressure while a break below the support at 26690 would signal a bearish continuation. It is worth noting that the daily RSI has remained within bullish territory over the course of September and has yet to break below the 50 mid-line to enter negative territory and enforce the Dow’s downtrend.
Support: 26800/ 26690
Resistance: 27047/ 27100