US indices traded sharply lower on Monday at the back of lingering concerns over US-China trade relations alongside heightened tensions in Hong Kong. A bleak global economic outlook stemming from geopolitical tensions and trade uncertainty has ramped up demand for safer assets and ultimately pushed US treasury yields lower. The rally in US bonds reflects markets’ risk off sentiment and concerns over a US recession. The only source of support markets can find amidst deteriorating global conditions is from monetary policy. Today the US releases CPI data and continued evidence of subdued inflation would support the case for another rate cut and register as a positive for US equities. Expect economic data to provide direction during the day while trade headlines remain in focus as trade concerns dominate market sentiment.
The Dow traded 1.48% lower to end at 25897 on Monday. Just as price failed to trade above the dynamic resistance of the 50-period MA, so the Dow’s attempt to recover from last week’s sell off. The price dropped to an intra-day low of 25798 and has yet to test the 200-day MA at 25580 should price trade below yesterday’s low. Look for sustained move below the 26020 level to maintain selling pressure while a trade above this level would target the 20-period MA at 26130.
Resistance: 26020/ 26130