Dow Jones Industrial Average (.DJI) mustered modest gains following a dramatic turnabout

Dow Jones Industrial Average (.DJI) mustered modest gains following a dramatic turnabout

Dow Jones Industrial Average (.DJI) mustered modest gains following a dramatic turnabout

U.S. stocks on Wednesday mustered modest gains following a dramatic turnabout, with all three key equity benchmarks recovering from losses of at least 1% which were partly driven by signs that global economic growth was slowing as the U.S. – China trade war intensifies.

What’s driving the market?

U.S. equity markets shook off losses to turn higher late in a thinly traded summer market, with little substantive news to drive the afternoon ascent.

Stocks initially sank as U.S. Treasury and European government bonds yields plumbed fresh lows. The 10-year Treasury TMUBMUSD10Y, +2.59%  fell below 1.70%, falling to an intraday nadir at 1.60%, around the lowest since late 2016, but were backing up in late-session trade Wednesday. Meanwhile, comparable German bonds TMBMKDE-10Y, +3.85%  hit a record low at negative 0.59%.

“I don’t think there’s any exact headline or data point that turned the markets around but I think investors are becoming more rational about the economic environment we’re in,” Lindsey Bell, investment strategist at CFRA, told MarketWatch, referring to the domestic economy.

“We have a very strong consumer and things are on a solid footing,” Bell said.

J.J. Kinahan, chief market strategist at TD Ameritrade, said that the volatility of the day could be partially attributed to thin summer trading volumes. “A thinly-traded market can sometimes exacerbate moves, and August trading tends to be light – its typically a sleepy month,” he said.

Investors have been jittery about the prospects of a recession in the U.S. against a weakening economic backdrop around the world.

Adding to that sentiment, central banks in India and New Zealand (as well as Thailand) on Wednesday lowered their domestic interest rates to levels lower than had been expected, highlighting anxieties centered on the health of the world-wide economy.

India’s central bank cut its key interest rate for the fourth consecutive time, reducing the repo rate by 0.35% to 5.40% to shore up the economy, while New Zealand’s central bank cut its benchmark interest rate to an all-time low of 1% on Wednesday.

“Central banks in New Zealand, Thailand, and India all cut rates overnight and that highlights how concerned central bankers are about the state of the global economy,” wrote David Madden, market analyst at CMC Markets UK, in a Wednesday note.

In the U.S., Chicago Fed President Charles Evans on Wednesday said he wants to adjust monetary policy until it is giving the economy a slight boost. This means another quarter-point rate cut this year, he said, in a breakfast conversation with reporters, noting also that “more accommodation could be needed”.

Meanwhile, for a second day in a row overnight Tuesday, the People’s Bank of China set the official midpoint reference for yuan at 6.9996 in Asian hours, but the level is approaching 7 to the U.S. dollar, widely viewed as a line in the sand for the currency. The PBOC fixes the currency daily and allows it to move up to 2 percentage points on either side of its midpoint.

A breach of that level on Monday, interpreted by some as an intentional weakening of its currency, helped to ignite a global stock market selloff and slump in bond yields, but markets stabilized on Tuesday, despite the prospect of an uncertain timeline for a Sino-American trade resolution.

Losses for stocks Wednesday accelerated after President Donald Trump tweeted that the U.S’s “problem is not China – We are stronger than ever, money is pouring into the U.S. while China is losing companies by the thousands to other countries, and their currency is under siege – Our problem is a Federal Reserve that is too… proud to admit their mistake of acting too fast and tightening too much (and that I was right!).

Technical Indicators

Overall, the bias in prices is: Downwards.

The projected upper bound is: 26,615.88.

The projected lower bound is: 25,424.63.

The projected closing price is: 26,020.26.

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 27 white candles and 23 black candles for a net of 4 white candles.

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 24.1287. This is not an overbought or oversold reading. The last signal was a buy 1 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 33.67. 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 1 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 -139.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 15 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 12 period(s) ago.

Rex Takasugi – TD Profile

DJ INDU AVERG closed down -22.449 at 26,007.070. Volume was 27% above average (neutral) and Bollinger Bands were 52% wider than normal.

Open     High      Low     Close     Volume___
25,814.22126,073.21125,440.39126,007.070 350,086,688
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 26,643.98 26,501.96 25,560.90
Volatility: 20 15 20
Volume: 325,141,792 268,855,200 316,730,752

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 1.7% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .DJI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .DJI and have had this outlook for the last 6 periods.

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