10:05, 30 November

Rallies Strongly Above Key 25,000 as Fed Changes Tune

The US30 index has enjoyed a healthy surge higher in the last week climbing back above the key 25,000 level. However in the couple of weeks leading up to the surge, the index fell strongly from another key level of 26,200 and whilst it found some support around 25,000 it finally broke through down to near four month lows. Now that the index has climbed back above 25,000 it is worth considering the significance of the 26,200 level again - it formed a classic doji candlestick at this level before reversing and falling just as strongly as it climbed. 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. 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 said he considers the central bank's benchmark interest rate to be near a neutral level, an important distinction from remarks he made less than two months ago.  "Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth," Powell told The Economic Club of New York.  He made it clear that the Federal Open Market Committee (FOMC), which sets interest rates, will be making policy decisions on developing economic and financial conditions, rather than a predetermined idea for where rates should be.  "While FOMC participants' projections are based on our best assessments of the outlook, there is no pre-set policy path," he said. "We will be paying very close attention to what incoming economic and financial data are telling us. As always, our decisions on monetary policy will be designed to keep the economy on track in light of the changing outlook for jobs and inflation."