US30

10:58, 12 June

Market analysis

Rallies through 26000 as Mnuchin Expresses Optimism over U.S. Economy

In the last week or so the US30 index has rallied strongly to return to back above the 25000 level and continue beyond another key level in 26000 to reach a one month high. Given the significance of the 26000 level, the index may now enjoy some support from this level as it consolidates. In the couple of weeks prior to the strong rally, the index had reversed and eased lower again falling to a four month low around 24600.

Despite its recent excursion below 25000, this level remained likely to offer some support to the index. Should the 26000 level not offer much support, the index may return below and remain between it and 25000 level for a little while.

The month of May has seen a strong decline for the index moving from a near all time high around 26700 down to its recent four month low. 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. 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.

According to U.S. Treasury Secretary Steven Mnuchin, there are no signs that the U.S. economy may be heading into a recession.In a recent interview on CNBC, Treasury Secretary Mnuchin expressed nothing but optimism about the state of the U.S. economy.  “U.S. growth it still really the bright spot of the world,” Mnuchin said on CNBC.  His analysis flies in the face of a U.S. Federal Reserve that may decide to cut interest rates multiple times this year and a May jobs figure that came in significantly below expectations.  “As it relates to the employment numbers, I wouldn’t focus on any one number: There’s plenty of volatility in these numbers,” he added. “We still see the growth in the U.S. as really quite strong.”  The Treasury Secretary deflected the attention to outside the United States expressing that his concerns are focussed on other regions in the world.  “We are somewhat concerned about what we see as a slowdown in Europe, China and other areas of the world,” he said.  “I don’t see any signs of a recession. I would say the bond markets are predicting ... a lowering of interest rates. We are in an environment where global interest rates are very low around the world, so I think that’s what you’re seeing in the U.S. bond markets,” he said. “But, no, we see no signs of a recession. We see another strong quarter in the United States.”