10:05, 08 May

Drops to Key 26000 Level as Trade War Fears Crush Stocks

In the last week or so the US30 index has eased lower and fallen sharply in the last 24 hours back to the current key level of 26000. Prior to this decline, the index had done well in the last few weeks to steadily move higher and finally push through the resistance at the key 26000 level and move to a six month high above 26600. Despite its fall in the last week, it has now consolidated in the last few weeks and is receiving support from 26000 allowing it to remain above this key level, for the time being.
It will be interesting to see if it can maintain the break and potentially start a new range and return to previous highs around 26800 and beyond to all time highs, which are not that far away.

Throughout February and March the US30 index seemed to have been content to trade in a narrow range roughly between 25400 and 26200, before the recent break. In early February the index 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. 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.

There are new concerns that U.S. President Donald Trump will release higher tariffs at the end of the week, which will most likely fuel tensions with China and extend the time frame for the talks, while also hurting the global economy.  President Trump surprised most with his statement on the weekend that he would raise tariffs on $200 billion worth of Chinese goods from 10% up to 25%.  Most analysts still expect a deal, however there is now a possible ‘spanner in the works’.  With the escalating trade tensions between the United States and China, US stocks were sold off heavily and it triggered global growth fears.  Late on Monday, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin said that China had backtracked from commitments made during trade negotiations. This combined with President Trump’s statement on the weekend raised concerns among some investors that trade talks between China and the United States could take much longer to resolve than previously thought.