Dow Jones Industrial Average (.DJI) Mixed Amid Hopes for Business Pickup

Dow Jones Industrial Average (.DJI) Mixed Amid Hopes for Business Pickup

Dow Jones Industrial Average (.DJI) Mixed Amid Hopes for Business Pickup

Wall Street’s major averages closed higher as investors digested the newly-released weekly report on US jobless claims.

On Thursday, the Dow Jones Industrial Average jumped 211.25 points, or 0.89 per cent, to 23,875.89. The S&P 500 increased 32.77 points, or 1.15 per cent, to 2,881.19. The Nasdaq Composite Index advanced 125.27 points, or 1.41 per cent, to 8,979.66.

Shayne Heffernan Trade Idea

“As updates on the U.S.-China trade war begin to resurface, investors should remember that U.S. President Donald Trump needs China as a partner – especially given this fall’s presidential election and the dismal economic environment because of the Coronavirus.

Trump is not going to undercut his economic argument by blowing up the Phase 1 trade agreement. Therefore, the ‘punishments’ threatened by a posturing Trump, leaked by White House officials and pronounced by Republicans on a seemingly daily basis are, for now, mostly vitrol that roils markets but will far short of being put in place.”

On Wednesday, major U.S. stock indexes pulled back late in the session, especially after Trump said China may or may not keep a trade deal between the two countries.

Trump said he would be able to report in about a week or two on whether China is fulfilling its obligations under a Phase 1 trade deal the two countries signed in January.

Still, the current environment does not mean the Trump administration will do nothing between now and the fall.

We expect Congress to pass a broad stimulus package that includes incentives for U.S. firms to move supply chains from China.” Shayne Heffernan PhD in Economics

Why This Matters

It’s true that the U.S. and China continue to have problems with access to certain areas of the Chinese market and that intellectual-property theft is a problem. It’s also true that China’s state-led capitalism diverts both its own markets and international markets.

We have to find ways to address these problems, but in the process, we cannot lose focus on the bigger picture.

Here are five things you should know about trade between the U.S. and China:

1. It’s more about individuals, not governments.

The U.S. government doesn’t trade with the Chinese government. It’s American farmers, manufacturers, services industries, and so on, who trade with Chinese individuals and businesses.

Yes, there are state-owned enterprises in China, and there are Chinese companies, seen as champions by the state, that receive either monetary or implicit support from the Communist Party. But the explosion of trade and investment with China over the past decade has been between private individuals, not governments or government entities.

2. China is the USA’s largest trading partner.

In 2016, U.S. trade with China overtook trade with Canada, making China their largest trading partner.

In 2017, the U.S. and China traded $711 billion worth of goods and services. While China is their largest trading partner, the total bilateral trade represents only about 13.5 percent of trade the U.S. has with the rest of the world.

But U.S. total world trade has been marginally decreasing. Total trade growth between 2000 and 2010 averaged about 6.6 percent. U.S. total trade so far this decade has averaged 3.3 percent.

3. Trade deficits with China don’t matter for U.S. employment.

There’s no relationship between the trade deficit the U.S. has with China and U.S. employment. The trade deficit has no impact on either the growth of U.S. employment or unemployment.

Direct trade and investment can affect employment. For example, a 2017 working paper from the National Bureau of Economic Research highlighted that China’s export growth after joining the World Trade Organization created a short-term loss of almost 1 million American jobs between 2000 and 2007.

But to put that in some perspective, the U.S. domestic economy has added roughly 1.4 million nonfarm jobs every year for the past decade.

In the long run, because of an increase in trade with China, U.S. consumer welfare increased by 6.7 percent.

4. What did the USA import from China in 2017?

At the top of the import list from China are cellphones ($70 billion), computers ($46 billion), and telecommunications equipment ($33 billion). But other major imports include toys, games, and sporting goods ($27 billion), clothes ($24 billion), and furniture ($21 billion).

The U.S. mostly exports to China civilian aircraft and engines ($16 billion), soybeans ($12 billion), passenger cars ($11 billion), and semiconductors ($6 billion).

5. China is not America.

China is not as free economically as America. China’s economic freedom score ranks it 110th in the world. The U.S. ranks 18th. Nor are the Chinese as prosperous as Americans.

In 2017, the median wealth per adult in China was $6,689. The median wealth per adult in America was $55,876. Because Americans are more prosperous, we like to buy more things.

Household consumption in the U.S. is roughly 69 percent of gross domestic product. Because Chinese consumers are less prosperous, they have to consume less and save more. Household consumption in China is roughly 39 percent of gross domestic product.

The U.S. economy continues to benefit because they maintain competitively low barriers to trade and investment. But the U.S. doesn’t have the lowest barriers to trade; nor are they the most economically free country. China has reduced its own barriers, but is still less free economically than the U.S.

No doubt, the U.S. has its problems with the way the Chinese manage their markets. They need to find ways to address their differences.

Certainly, they must enforce a rule of law to punish those guilty of intellectual-property theft. Property rights are the foundation for any thriving economy.

Meanwhile, the U.S. must also continue to pursue economic freedom. But it should do so without souring U.S.-China economic relations in the process.

Technical Indicators

Overall, the bias in prices is: Downwards.

The projected upper bound is: 26,872.14.

The projected lower bound is: 20,756.37.

The projected closing price is: 23,814.26.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

An inverted hammer occurred. If this occurs during a downtrend it implies a reversal. Look for a confirmation of the reversal on the bar.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

A shooting star occurred (a shooting star has a small real body near the bottom of the candle and a long upper shadow). During an uptrend(which appears to be the case with DJ INDU AVERG) the long upper shadow indicates that the bears are gaining control and a top may occur.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 38.9963. This is not an overbought or oversold reading. The last signal was a sell 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 52.40. 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 31 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 16. This is not a topping or bottoming area. The last signal was a sell 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 1 period(s) ago.

Rex Takasugi – TD Profile

DJ INDU AVERG closed up 211.250 at 23,875.891. Volume was 19% below average (neutral) and Bollinger Bands were 65% narrower than normal.

Open        High         Low          Close        Volume
23,837.211  24,094.619   23,834.391   23,875.891   371,684,736
Technical Outlook
Short Term:        Neutral
Intermediate Term: Bullish
Long Term:         Bearish
Moving Averages: 10-period         50-period          200-period
Close:           23,988.72         23,145.37          26,455.07
Volatility:      26                87                 46
Volume:          403,243,488       579,445,888        347,717,472

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.

Summary

DJ INDU AVERG is currently 9.7% below 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 19 periods.

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