Wall Street 30 (DOW) sets up for trade talks

The Wall Street 30 (DOW) has seen a knee-jerk reaction to the release of minutes from the last Federal Open Market Committee (FOMC) meeting, having initially declined on the brief before subsequently recouping most of the losses incurred. The below hourly chart of the Wall Street 30 highlights the ‘whipsaw’ type index price behaviour post the release of these minutes.

Some key takeaways from the FOMC meeting are as follows:

• At the last FED meeting the economic outlook was viewed as positive
• The ongoing trade war is increasing the downside risks to the economic outlook
• Data post the meeting has deteriorated slightly
• The FED did not give a firm indication of further easing
• Markets are however pricing in a rate cut at this month meeting, 25 basis points (0.25%) moving the Federal Funds rate range to 1.5% to 1.75%

What to watch when trading the Wall Street 30 today

Today will mark the start of renewed talks between the US and China around trade policy. Trade negotiations have been a key narrative in markets for more than a year now and if there is one thing markets have learnt, it’s that the uncertainty relating to talks provide a greater propensity for volatility. Traders will want to keep a close eye on the talks for signs of trade progression (positive for equity markets) or digression (negative for equity markets).

There has also been a tendency for US president Donald Trump to provide an off-script narration via Twitter to these events. In turn day traders might find merit in following the @realDonaldTrump handle for real time intraday directional catalysts on the Wall Street Index.

This afternoon will also see the release of month on month Consumer Price Index (CPI) data, another key market data point. US policy makers have been trying to stimulate stagnant inflation within the region. Forecasts suggest CPI data will be realised at 0.1% month on month and core CPI at 0.2% month on month.

Wall Street 30 daily chart technical view

The Wall Street 30 is currently consolidating between the 25970 (support) and 26650 (resistance) levels. Circled red we see a bullish engulfing candle pattern forming off the support of this range. The reversal (should it confirm with a close) suggests a move back to resistance at 26650. A break above this level (confirmed with a close) would call for a move to the next level of resistance considered at 27060. Should the index price instead move to close below range support (25970) the bullish range setup would no longer be valid and a move towards the next level of support at 25730 would then be favoured.