Dow Jones Futures Plunge Further on Trump’s US-China Trade Comments

Summary:
• US President Trump prefers a US-China deal after the 2020 elections, sending jitters down the spines of Dow Jones traders and extending yesterday's selloff.

Dow Jones futures extended yesterday’s plunge this Tuesday on the back of comments from US President Donald Trump alluding to his preference to sign the US-China trade deals after the 2020 election.

US President Donald Trump was quoted as saying that he may opt to wait until after the 2020 US elections to ink a US-China trade deal. The US markets took this information very badly and the Dow futures are heavily in the red today, dragged down by stocks directly exposed to the US-China trade spat. Shares of Apple, Alibaba and chipmaker Advanced Micro Devices are all down heavily as a result.

The recent slide on the Dow Jones futures has resulted from a slew of negative fundamentals which hit the markets on Monday. First, we had the re-imposition of tariffs on steel on Argentina and Brazil, followed by comments by the US Commerce Secretary on possible sanctions on China to kick in on December 15. Then we had the weak US ISM Manufacturing PMI data, and then comments by US President Trump in which he said:

“in some ways I think it is better to wait until after the election, if you want to know the truth…”, adding that he did not have any set deadlines to signing the US-China trade deal.

There is also talk of a possible imposition of 100% tariffs on champagne and other French goods, with France vowing a retaliation.

The Dow Jones futures are currently trading at 27608 as at the time of writing.

Technical Outlook for Dow Jones Futures

The Dow is in the completion phase of a short-term bearish pennant which was initiated by yesterday’s slide and subsequent consolidation, before a resumption of the downside move. This measured move is expected to take the Dow Jones futures to the 27554 area, which is where previous highs that are now acting in role reversal were found on November 5, as well as a cluster of lows on November 10 – 12. A break of this area could target the next support level at 27,304, which is where the previous highs of July 31 and September 13 are found.

On the flip side, a recovery sees the Dow targeting the 27691 area (previous low of November 21 and yesterday’s consolidation price zone). Successful recovery above this level refocuses the Dow towards re-attainment of recent all-time highs.