Wall Street indices took a hit yesterday as deteriorating economic outlook in China and tighter monetary conditions globally threaten growth. While tech stocks were hit the most, other sectors also dropped. Dow Jones index finished 1.19% lower and futures on the index (US30) continued to move lower later on. Today's CPI reading at 1:30 pm BST may put some pressure on equities should it show major acceleration as it will hint at the possibility of an even more hawkish Fed.
Taking a look at the US30 chart at H4 interval, we can see that the index moved to an interesting technical spot. US30 is currently testing a support zone ranging below 38.6% retracement of the upward move launched at the beginning of May. What's more, this zone also hosts the neckline of a head and shoulders pattern. Breaking below could therefore pave the way for a drop to as low as 78.6% retracement at 32,950 pts - a textbook range of a downside breakout from the head and shoulders pattern.
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Source: xStation5
