US Indices traded lower for a second day on Wednesday as mixed results on corporate earnings coupled with trade concerns weighed on sentiment. Fears over a prolonged US-China trade dispute were reignited after the Wall Street Journal reported a stall in negotiations due to China’s demands to resolve restrictions against its giant telecom Huawei. While the persisting trade uncertainties provide the FED with an incentive to cut rates, market participants are currently giving in to its negative impacts on US corporations’ outlooks and the global economic environment. In terms of data, US housing starts and building permits reports missed expectations and provided no relief. Moreover, concerns over economic weakness in the US encouraged risk averse flows which translated into lower treasury yields yesterday. Today, we can expect earnings reports to continue to influence price action in US equities alongside the release of US Phil Fed Manufacturing index which is expected to show a rebound.
The Dow Jones exited its consolidation phase as it dipped below the 27250 level to end 0.42% lower at 27219. The daily RSI reading eased off the overbought territory as the index finally retreated from the zone of record highs and exhibits short term weakness. Look for a sustained move below 27250 to maintain selling pressure and extend the pullback towards the 27080 level followed by the 27000 level. On the other hand, a trade above the 20-period MA around 27270 would indicate the presence of buying pressure.
Support: 27080/ 27000
Resistance: 27270/ 27320