Dow Jones Industrial Average (.DJI) trade war fears just won’t go away

Dow Jones Industrial Average (.DJI) trade war fears just won’t go away

Dow Jones Industrial Average (.DJI) trade war fears just won’t go away

Wall Street’s trade war anxiety isn’t going away.

The Dow dropped 391 points, or 1.5%, on Monday afternoon. The S&P 500 and Nasdaq lost 1.2% apiece. Treasury bond yields once again fell sharply as investors piled into safe assets.

The turmoil comes as investors brace for the US-China trade war to deal more damage to the global economy. The risk is that the tit-for-tat tariff battle between the world’s two largest economies could turn the economic slowdown into a recession.

“The ongoing trade dispute between the US and China appears to have escalated into a full-blown economic conflict,” David Kostin, chief US equity strategist at Goldman Sachs, wrote in a note to clients.China-sensitive stocks including Caterpillar (CAT), Deere (DE) and Boeing (BA) all declined more than 1%.

Goldman Sachs raised its estimate of how much the trade war will hurt the economy. The firm now expects fourth-quarter US growth to slow to 1.8%, compared with 2% previously.

The rush into ultra-safe government bonds have caused Treasury yields to collapse. The 10-year Treasury rate tumbled below 1.7% on Monday, a sharp slide from 3.2% last fall. The 30-year Treasury yield is nearing all-time lows.

The plunge in bond yields will further pressure lending profits at banks, which make money on the difference between short and long-term rates. Citigroup (C), Morgan Stanley (MS) and Goldman Sachs (GS) fell about 3% apiece.

US stocks declined last week for the second week in a row. The S&P 500 is now sitting about 5% below the all-time highs set in late July prior to the outbreak in trade tensions.

“The bear is alive and kicking,” Morgan Stanley equity strategists led by Michael Wilson wrote in a note to clients on Monday.

Financial markets have performed poorly even after the Federal Reserve granted investors’ wishes by lowering interest rates in late July, the first rate cut in nearly 11 years.

Rather than the trade war, Wilson argued investors are reacting negatively to the realization that the Fed has gone from very hawkish to very dovish due to the darkening economic environment.

“The Fed has reversed its position over the past 9 months because the outlook for the economy, both here and abroad, deteriorated significantly,” he wrote.

Technical Indicators

Overall, the bias in prices is: Downwards.

The projected upper bound is: 26,530.84.

The projected lower bound is: 25,307.88.

The projected closing price is: 25,919.37.

Candlesticks

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 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 72.9026. This is not an overbought or oversold reading. The last signal was a buy 4 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 35.69. 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 4 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 -81. This is not a topping or bottoming area. The last signal was a buy 2 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 15 period(s) ago.

Rex Takasugi – TD Profile

DJ INDU AVERG closed down -389.729 at 25,897.711. Volume was 27% below average (neutral) and Bollinger Bands were 62% wider than normal.

Open     High      Low     Close     Volume___
26,169.91026,178.94925,824.93925,897.711 200,584,208
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 26,344.84 26,571.00 25,573.95
Volatility: 23 15 20
Volume: 323,099,072 267,249,264 314,850,400

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 1.3% 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 moderate flows of volume out of .DJI (mildly bearish). Our trend forecasting oscillators are currently bearish on .DJI and have had this outlook for the last 9 periods.

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