The Dow Jones alongside the broader US stock market tumbled on Wednesday as an inverted portion of the yield curve reignited fears of a looming recession. Concerns over economic weakness in the US encouraged risk averse flows which translated into lower treasury yields as weaker sentiment ramped-up demand for safer assets. The US-China trade war further disrupts the US and global economic outlook as uncertainty over each nation’s retaliatory moves dissipates the prospect of a trade deal in the near-term. Today, While US-China trade developments dominate market sentiment, the focus of attention will shift to economic data during the day as traders will cautiously look to US pending home sales, preliminary 1st quarter GDP reading, trade balance figures and jobless claims report to provide direction.
The Dow Jones crashed over 400 points as it extended losses below the 25,000 level on Wednesday before settling off its low to end at 25126. The Dow has well developed its bearish view given that it was its second day to close below the 200-day MA around 25400, now turned to newly found resistance coinciding with the 20-period MA. This level presents a problem for the bulls as it acts as a barrier to attempts at recovery and should be faced if price manages to trade and hold above the 25200 area of resistance. Meanwhile look for a sustained move below the 25200 to maintain selling pressure and a break below the support zone of 24930/24900 to trigger an accelerated drop towards lower support levels at 24860 and 24780.
Support: 24930/ 24860
Resistance: 25215/ 25400