11:49, 20 November

Relying Heavily on Support at 25,000 as Fed May Reconsider Plans

In the last few days the US30 index has enjoyed some strong support from the key 25,000 level after recently falling strongly for the week prior from another key level of 26,200. It formed a classic doji candlestick at this level before reversing. Just prior to the doji, the US30 index enjoyed a strong resurgence moving from multi-month lows back up to the key 26,200 level. In the couple of weeks prior to the strong rally, the index fell sharply again down to its lowest levels in four months, after attempting to rally off support at 25000 several weeks ago. After reaching a new all time high earlier last month the US30 index been reasonably volatile since and seems to have found a comfort zone between the two key levels.

For several weeks in September the US30 index had been content to trade within a narrow range near 2018 highs under 26200, before its recent move higher. The 25000 level had rejected the index on several occasions throughout this year. The 25000 level has been significant as it has offered lots of resistance and would have come as no surprise when it supported the index back in July and August. Around the end of June the index spent several days consolidating above 24000 after a strong fall over several weeks prior to that. The fall saw the index move sharply lower from a three-month high above the resistance level at 25000 down to a near two month low several weeks ago.

In the second half of May the index was meeting stiff resistance right at 25000 which forced the index lower down to a three-week low. In the few weeks before last week’s easing lower, the index had moved quite strongly off the now well-established support level at 23500. This recent range trading is not unexpected after the strong movement higher throughout all last year.

U.S. Federal Reserve Chairman Jerome Powell says the American economy is performing well but he's keeping an eye on potential risks ahead.Those include fading impact from tax cuts, a slowdown in global growth and the impact of the Fed's own interest rate hikes.U.S. President Donald Trump has called the Fed's rate hikes his "biggest threat.", however Chairman Powell has responded that the Fed has the tools and the protections it needs to serve the public in a "non-partisan, professional way." The Fed is widely expected to raise interest rates at its December meeting, however doubts have started to creep in the last week that they may pause on the rate rises next year.Recent speeches from several Fed officials have been interpreted as being more dovish as Fed officials seems to be more seriously looking beyond the strong U.S. economy to an environment where stock prices have been falling and credit spreads are widening.Last week Chairman Powell noted that there's been "a gradual chipping away" at global growth and what happens internationally matters. The same point was made towards the end of last week by Fed Vice Chair Richard Clarida who said that the global economy deserves attention, and it looks like it's slowing.