10:25, 29 May

Eases Towards Four Month Low Below 25500 as U.S. Economy is on ‘recession watch’

In the last week or the US30 index has reversed and eased lower again as it looks poised to move down through 25200 and reach its lowest level in four months. The 25000 level is the next most likely support level. Only in the week or prior, the index had done well to reverse and rally back towards the key 26000 level which as expected offered resistance again given its history this year. 
For a couple of weeks just prior, the index eased lower and then fell sharply back to a three month low below 23500, before regaining some of that lost ground. Throughout April and prior to its decline, the index had done well to steadily move higher and finally push through the resistance at the key 26000 level and move to a six month high above 26600.

It had been receiving some support from the 26000 level however this has now given way and may provide some resistance to prices rallying higher. 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.

One of Wall Street’s top investment banks, Morgan Stanley warned that the stock market and economic outlook in the United States is “deteriorating.”U.S. profits and economic growth are at risk thanks to renewed trade tensions and a slump in economic data.  “Recent data points suggest US earnings and economic risk is greater than most investors may think,” wrote Chief U.S. Equity Strategist Michael Wilson.  Many recent reports reflect April data, “which means it weakened before the re-escalation of trade tensions,” Wilson continued. “In addition, numerous leading companies may be starting to throw in the towel on the second half rebound--something we have been expecting but we believe many investors are not.  ”This follows the secretary general of the Organisation for Economic Co-operation and Development (OECD) who warned that trade tensions between the United States and China have stalled a global recovery and are continuing to endanger investment and growth.  "We were in the middle of a recovery when all these decisions about trade started and not only did it stifle the recovery, it basically has produced the slowdown and the potential for greater damage is still there," Angel Gurria said in an interview.