The US stock markets have started the day on a strong bullish note, as a number of factors are helping to create a risk-on atmosphere. The Dow Jones Industrial Average is currently trading at 26, 221.50, a gain of 1.5% so far (as at the time of writing), while the tech stocks index (Nasdaq) was also up by 1%.
Comments from both sides of the US-China divide have helped to boost trading confidence and added to the risk-on sentiment with which the markets started the week. Support came from none other than US President Donald Trump, who tweeted: “doing great with China and other trade deals…”. He also hinted at new cuts to payroll tax, tweeting “we are always looking at payroll tax.”
On the Chinese side, a statement from the Chinese Foreign Ministry pointed out that differences between the US and China were natural, and that resolution of differences through dialogue was important.
As markets await the FOMC minutes by 6pm GMT, it is important to highlight that the Dow Jones Industrial Average is still showing a potential double bottom formation on the daily chart, with a key test of the neckline underway. A break above this neckline will confirm the pattern and will open the door for a medium-term push to the 27,420 target point. A failure to break the neckline has the potential to open the door for a medium-term retest of the 25,195 support area.