Summary:
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US indices in the red ahead of cash session
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China to ask WTO for authorisation to impose sanctions
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US30 fills gap from last month; Forthcoming session could be pivotal
There’s a negative feel to trade ahead of the US session for equities with European bourses in the red and all 3 major US indices also trading lower. In general it appears to be a bit of a continuation of the selling seen into last night’s closing bell on Wall Street while the latest talk on the trade front has done little to fire up the bulls. Earlier this morning reports that China is to ask the WTO for authorisation to impose trade sanctions on the US have brought the sellers out with notable declines seen not long after 9AM when the news broke.
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The US30 broke below prior support around 25882 around the time these WTO reports hit the wires and the market then embarked on a descent in excess of 100 points to make a new low for the month at 25766. Source: xStation
Looking more closely at the WTO story, this seems like a preemptive response to the $200b tariffs that the US is planning on putting on Chinese goods. China can’t hit back with as large a tariffs as they don’t import as much from the US as they export but this seems to be a move to show that they are trying to do things in keeping with WTO rules. The case cites Washington's non compliance with a ruling over US dumping duties and China will seek authorisation at a special meeting of the WTO’s dispute Settlement Body on Friday 21st September.
The US30 has now filled the gap higher seen from the end of August at 25789. This could be seen as a crucial level and if buyers fail to step in around here then a larger decline may well ensue. Source: xStation
The significance of the current level can also be seen from longer term charts. A daily view reveals that 25760 also coincides with the high from the end of February and when price retest this last month it found some resistance. The gap higher (shown on charts above) marked a clear break through this region but should price end today back below here then this latest push higher may be seen as false. Furthermore, the market has now pulled back into its 21 EMA for the first time in almost a month and a decisive push lower could be seen to indicate an end to the uptrend which began back in July. There’s plenty to go on around these levels for several reasons that could deem them pivotal. Today’s session could well set the tone for the rest of the week as far as this market is concerned as if these levels hold then the uptrend remains intact but a break and close below here would open up the possibility of a larger decline.
From longer timeframes it is evident that price is now retesting the late February high and also the 21 EMA which could be seen to heighten the importance of the current levels. How price reacts here and for the rest of the day may well set the tone going forward. Source: xStation
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