11:23, 13 March

Rallies Above Key 25000 Level as Powell Says Fed Policy Is Appropriate

The US30 index has rallied well in the last few days after spending the previous two weeks easing from a three month high around 26200 a few weeks ago. Several weeks ago the index seemed content to have consolidated in a narrow range right above the significant level of 25,000 before it began its slow climb higher. It was able to resume what has become a very steady climb higher which started back in December. 
At the end of January, the 25000 level offered some resistance to the index however this was quickly broken through, only for the level to prop up the index since, and this level remains key.

For the last few months, the two key levels of 24,000 and 25,000 have been playing a role and influencing price action. In the last couple of months, the index has done very well to move back within the range between these two levels, after falling to its lowest levels in 18 months below 21,500. It met some resistance at 24,000 before moving through. December was several weeks the US30 index would rather forget as it fell very sharply down through any support at the 25,000 level and then also through the 24,000 level down to that 18 month low. As expected the 24,000 level did offer some resistance and it is likely this level will prop up the index should it decline from its current levels.

In late November it enjoyed a healthy surge higher climbing back above the key 25,000 level to above 26,000 before reversing sharply and falling lower. The last few months have seen the index moving sharply between 24,000 and 26,000 as the volatility and the swings back and forth intensified before the massive drops in December which was the most volatile the index has been in many years. It will be interesting to see whether the peaks from November and December last year provide some resistance to the index soon.

U.S. Federal Reserve Chairman Jerome Powell has said that interest rates can remain on hold as the central bank waits to see how conditions evolve, indicating that there’s no clear time limit to the Fed’s current pause.  In an interview on CBS News’ 60 Minutes on Sunday, Mr Powell said “Inflation is muted and our policy rate we think is in an appropriate place.”  He called the current rate setting “roughly neutral” and attempted to define the Fed’s stance of patience while reviewing fresh data.  When asked to clarify his use of the word patient, Mr Powell said, "Patient means that we don't feel any hurry to change our interest rate policy. What's happened in the last 90 or so days is that we've seen increasing evidence of the global economy slowing down, although our own economy has continued to perform well."  When asked specifically about weakness in the U.S. economy, Mr Powell responded, "Generally speaking, the U.S. economy is coming off a very strong year last year. We had growth just a touch higher than 3 percent. We have high levels of employment, low levels of unemployment, wages are moving up. Consumer confidence is high, business confidence is high. We've seen a bit of a slowing, but I would say the principal risks to our economy now seem to be coming from slower growth in China and Europe and also risk events such as Brexit."