Dow Jones
The Dow Jones added to yesterday’s loss as investors awaited an important speech by Donald Trump on China. The index fell as the closely followed fear and greed index crossed an important milestone. Also, it also fell as Citi’s panic vs euphoria index rose to euphoria levels.
The Dow Jones index declined by more than 100 points adding to the 147 losses made yesterday. The biggest news today is on a news conference that Trump will have about Hong Kong and China. That is after China rattled markets on Friday when it said it would bypass Hong Kong’s basic law and implement its securities law. The decision was passed by the Chinese parliament yesterday.
The Trump administration warned that China would pay a price for the decision. Some of his options are removing the special status the US has with the United States or adding sanctions to some senior Chinese officials.
Analysts say that removing the special relationship would hurt the same people the US is trying to protect. This is mostly because many Hong Kong residents have been loyal to the US and have actually demonstrated against the government.
In a statement earlier today, Carrie Lam warned the US against imposing tariffs, citing the big trade surplus the US has with the city.
Several companies in the Dow Jones would be affected if the US starts a trade war with Hong Kong. For example, Disney, which has a large theme park in the city would be hurt. The same is true with Apple, JP Morgan, and Goldman Sachs that do a lot of business in the city.
The Dow Jones declined even as the closely watched fear and greed index continued to rise. The index is now at 50, which is at the highest it has been since March. A surging fear and greed index is usually a sign that stocks are getting pricey.
Meanwhile, another gauge by Citi is sending alarm. The panic vs euphoria index surged to euphoria levels. This suggests that stocks will be lower than where they are in the next 12 months. In the report, Citi said that the current rally was unique because it did not have inflows since more than $120 billion has left the market. It was instead mostly because of unwinding of short positions.
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The Dow Jones index is trading at $25,403. The price is also above the 50-day and 100-day exponential moving averages. Also, the index movement shows that bears are attempting to push it below the 61.8% retracement that it passed on Tuesday. Therefore, a successful break below this retracement will send a signal that bears are back, which will see them attempt to retest the 50% retracement at $23,947.
On the flip side, a move above yesterday’s high of $25,815 will mean that bulls are in control and that they will attempt to push the price higher.