DAX Index
Dow Jones futures have started the day on a positive note, as markets attempt to shake off the negative sentiments that developed around the US-China trade war in the last 24 hours. The Dow Jones index may have to sustain the uptick today in order to fully recover from yesterday’s big drop that saw the Dow Jones futures lose more than 300 points.
Apart from the pessimistic trade sentiment, the Dow Jones also reacted to yesterday’s disappointing US PPI data. The annualized core Producer Price Index (PPI) fell to 2.0%, the lowest levels in 2 years. The core PPI (monthly) dropped by 0.3%.
Investors on Dow Jones will also have their sights set on the FOMC minutes, after the Fed Chair Jerome Powell hinted that the Fed will start to purchase US government debt instruments in order to expand its balance sheets.
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The Dow Jones futures asset continues to trade within the confines of the rising wedge on the long-term chart. Yesterday’s drop was unable to the wedge’s lower border and today’s price candle has bounced firmly from this level. This has produced a doji on the weekly chart.
The Dow will need a negative outcome from the US-China trade summit to generate sufficient downward momentum to break the lower wedge trendline. A 3% penetration close below the wedge’s lower border is needed to breach the pattern. This price move would open the door for a test of the 25399.49 horizontal support (24 March and 25 August lows).
To the upside, 26704.60 (January 21 2018 and 28 April 2019 highs) remains the initial upside target if positive headlines from the summit sustain today’s bounce. Above this level, 26978.53 could come into focus if positive trade headlines produce good momentum to sustain a break of 26,704.60.