Friday, May 31, 2019

DOWJONES - 31 May 2019


Fundamental Highlights

US Indices ended marginally higher on Thursday whilst capped by trade tensions, a pessimistic global outlook and the concerning inversion of the yield curve known to signal a looming recession. Providing support throughout the day was GDP data which was revised lower to 3.1% versus the previous estimate of 3.2% annual growth rate however beat forecasts of 3%. On the other hand, US pending home sales unexpectedly declined by 1.5% revealing a soft housing market while jobless claims rose to 215K. While some of the data reveals the economy may be losing steam, the greater drag on the economy and markets stems from the ongoing trade tensions that have left investors uncertain whether China would retaliate and impose restrictions of earth metals to the US. Moreover, President Trump decided to impose tariffs on Mexico yesterday, further escalating global trade tensions and encouraging risk off sentiment. Today, the US publishes personal spending report and PCE data, the Fed’s preferred gauge for inflation which should further determine the likelihood of the markets’ favored rate cut from the Central Bank. The data should provide direction during the day while caution will be the leading sentiment.

Technical Analysis

The Dow Jones traded 0.17% higher as it bounced off its low at 25930 towards the resistance at 25220 before ending at 25169. While the Dow remains vulnerable to further weakness, we could see the RSI reading reach the oversold threshold which may hold the 25930 level as support. Failure to trade above the 25,080 level would maintain selling pressure and eventually lead to breaching the 25930 level to target the lower support at 25850.

Support: 24900/ 24850
Resistance: 25080/ 25220

Chart (H4)