Friday, July 5, 2019

DOWJONES - 05 July 2019


Fundamental Highlights

Dow futures were little changed on a day of low-volume trading due to the US Independence day holiday. Today we should see marked price movement as regular trading hours resume and the US publishes the largely awaited non-farm payroll report. The Dow had rallied a day prior to the holiday to notch a record high against an unconvincing fundamental backdrop consisting of a dovish Fed from which market participants are expecting an imminent rate cut and US economic data pointing to a slowing domestic economy involved in the US-China trade dispute which has burdened global growth. Because today’s NFP report will be the last we see before the next FOMC meeting, we can expect a slight miss in employment data to be the best bullish scenario for the Dow as it would support the case for a rate cut. Meanwhile on trade news, China demanded that the US lifts existing tariffs while the US intends to keep them in place to ensure China’s compliance. The two nations might retreat back to a trade impasse should they fail to reach a compromise and markets will monitor further trade headlines to determine sentiment.

Technical Analysis

Dow futures traded marginally higher on Thursday and will look to today’s NFP report to determine whether the rally should continue or potentially see a reversal. We will look for a sustained move above 26940 to maintain buying pressure with a break above the 27000 level required to signal a bullish continuation as price gradually drifts higher. Alternately a sustained move below the 26940 level would indicate selling pressure with a decline below the 26880 level required to drive the index to meet the lower support at 26800. Meanwhile, the daily and 4H RSI reading continue to hover close to the overbought territory suggesting that we may see a downward reaction which would largely depend on today’s economic data.

Support: 26890/ 26800
Resistance: 27000/27080

Chart (H4)