NASDAQ Composite (.IXIC) investors disappointed that the Federal Reserve cut interest rates
U.S. stocks closed sharply lower Wednesday with investors disappointed that the Federal Reserve cut interest rates in order to cushion the economy from the effects of President Trump’s trade war with China, but refrained from suggesting further rate cuts were on the way.
The Dow Jones Industrial Average DJIA, -1.23% sank to a triple-digit loss, its biggest one day fall since May 31.
The Dow Jones Industrial Average DJIA, -1.23% closed down 334 points, or 1.2%, at 26,864 while the S&P 500 SPX, -1.09% shed 32 points, or 1.1% to 2,980. Meanwhile, the Nasdaq Composite COMP, -1.19% lost 98 points, or 1.2% to 8,175.
Investors were widely expecting a 0.25% cut in the federal funds rate but some were disappointed the Fed didn’t lower interest rates by more than a quarter point, or clearly signal that further rate cuts were on the way.
At his press conference, Fed chair Jerome Powell added that “the Fed has moved to a somewhat more accommodative stance” as part of a “mid-cycle adjustment” as “trade tensions seem to be having a significant effect on the economy” and the “global manufacturing slowdown is a bigger factor than expected last year”.
But Powell’s comment that Wednesday’s rate cut was part of a mid-cycle adjustment and not necessarily the start of a monetary easing cycle disappointed investors who had priced in further rate cuts later this year.
“The FOMC statement does not suggest a Committee committed to additional cuts,” UBS economist, Seth Carpenter said. “On balance, the Fed has stood down from high alert.”
With U.S. unemployment still at a fifty year low and inflation subdued, the Fed focused on the potential threats to the record eleven year economic expansion posed by President Trump’s trade policies and the resulting slowdown in global economic growth.
“I think the biggest surprise here is what is not being said: There is nothing in the statement about growth cooling here at home, and there is not a whole lot to suggest another rate cut is coming down the pike,” said Mike Loewengart, vice president of investment strategy at E*Trade.
“The threat of a recession has historically been the main catalyst for monetary easing, but today we’re seeing a Fed hanging its hat solely on inflation and the global economy. So those two factors will be closely watched by all for the balance of the summer.”
Overnight U.S. and Chinese delegates, including Trade Secretary Robert Lighthizer and Treasury Secretary Steven Mnuchin, concluded the first round of talks since the G-20 gathering in May without any substantive developments on the tariff front, according to reports.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 7,967.20.
The projected upper bound is: 8,387.46.
The projected lower bound is: 7,982.30.
The projected closing price is: 8,184.88.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white 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. It then signifies that the momentum may be shifting from the bulls to the bears.
If the engulfing bearish pattern occurs during a downtrend (which appears to be the case with NASDAQ COMPOSITE), 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 43.3874. This is not an overbought or oversold reading. The last signal was a sell 2 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 51.56. 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 40 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 -79. This is not a topping or bottoming area. The last signal was a sell 1 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 sell 9 period(s) ago.
Rex Takasugi – TD Profile
NASDAQ COMPOSITE closed down -98.195 at 8,175.419. Volume was 38% above average (neutral) and Bollinger Bands were 54% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 8,244.19 7,960.19 7,545.95
Volatility: 15 17 25
Volume: 534,763,072 562,307,200 586,829,824
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.
NASDAQ COMPOSITE is currently 8.3% above its 200-period moving average and is in an upward trend. Volatility is Our volume indicators reflect volume flowing into and out of .IXIC at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .IXIC and have had this outlook for the last 31 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.