Dow Jones Industrial Average (.DJI) investors continue to worry about the US economy and the potential for a US-China trade deal
The Dow and US stocks finished lower on Thursday, knocked down by worries about the US economy and the potential for a US-China trade deal.
On top of that, the Federal Reserve’s market-stimulating interest rate cuts appear to have come to an end. All that put stocks in the red.
The S&P 500 (SPX), which hit a new record high Wednesday, traded down 0.3%. The Dow (INDU) slipped 0.5%, or 140 points, and the Nasdaq Composite (COMP) fell 0.1%.
Chinese officials have expressed doubts about whether the world’s two largest economies can reach a full trade deal, Bloomberg reported. That is casting a long shadow over the “phase one” agreement that the countries reached earlier in October.
The preliminary deal was meant to be signed at the APEC meeting in Chile, but the South American country announced this week that it will no longer be hosting. President Donald Trump tweeted Thursday “China and the USA are working on selecting a new site for signing of Phase One of Trade Agreement, about 60% of total deal.”
Trump had other ideas about why the market is down Thursday, blaming it on the impeachment inquiry. But the S&P 500 has actually climbed 4% since House Speaker Nancy Pelosi announced the impeachment inquiry on September 24.
For the month of October, all three major stock indexes are up. The Nasdaq has gained the most at 3.7%, followed by the S&P with 2.1%. The Dow only edged up 0.5% in the month.
Financial markets have been rising and falling with trade headlines all year. Since the summer, the Federal Reserve’s decision to stimulate the slowing US economy with interest rate cuts has also been a positive backdrop for stocks.
On Wednesday, the US central bank cut interest rates for a third time in a row. But Fed Chairman Jerome Powell strongly hinted that the Fed is going to stand pat for the time being. Market expectations for a December rate cut are only at 23%, according to the CME FedWatch Tool.
Although the Fed acknowledged risks facing the global economy, it also said America was still doing well in comparison.
But poor economic data keeps trickling in: earlier Thursday, the Institute of Supply Management’s Chicago Business Barometer came in at its lowest level since December 2015. It was its second-straight reading below 50, which marks the line between growth and contraction.
Trump has long been critical of both the central bank’s policy and Powell, who he himself picked. Trump tweeted Thursday that “people are VERY disappointed” in the central banker. The president added that the US dollar and “rates are hurting our manufacturers. We should have lower interest rates than Germany, Japan and all others.”
Benchmark interest rates set by central banks mostly impact financial institutions and trickle down into the economy through them. They are not the same as interest rates a country pays on its debt, which are driven by factors such as risk sentiment. Particularly the government bonds of the United States, Japan and Germany are considered safe haven investments and are popular in times of market trouble.
Central banks in both the European Union and Japan kept rates at ultra-low levels, though economic growth has been sluggish at best.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 26,689.18.
The projected upper bound is: 27,676.38.
The projected lower bound is: 26,449.82.
The projected closing price is: 27,063.10.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend (which appears to be the case with DJ INDU AVERG). It then signifies that the momentum may be shifting from the bulls to the bears.
If the engulfing bearish pattern occurs during a downtrend, it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 80.3030. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 5 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 56.17. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 61 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 64. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 13 period(s) ago.
Rex Takasugi – TD Profile
DJ INDU AVERG closed down -140.459 at 27,046.230. Volume was 6% above average (neutral) and Bollinger Bands were 27% narrower than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 26,937.85 26,706.20 26,196.82
Volatility: 9 15 15
Volume: 264,805,360 250,447,264 278,735,488
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
DJ INDU AVERG is currently 3.2% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of .DJI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .DJI and have had this outlook for the last 0 periods.
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