Dow death cross pattern is nearing

Stocks opened slightly higher as China begun purchasing soybeans from the US and is expected to buy more.  Positive comments also came from the China Commerce Ministry (MOFCOM) on improving communications on trade.  The recent string of headlines has been fairly optimistic on US-China trade relations and supportive for stocks and negative for risk currencies, such as the Japanese yen. Wednesday’s rally came from the Wall Street Journal report that the “Made in China 2025” may be replaced.  A friendlier industrial policy to foreign business is a key goal from the Trump administration.  Progress has been made since the Xi-Trump meeting, but are nowhere near being over.

Despite the strong rebound from the December 10th low, price is struggling to muster up a strong rally.  Price action on the Dow Jones Industrial Daily Chart is also showing that 24,800 remains initial resistance.  Traders are also paying close attention, to see if we will see a death cross pattern.  This technical market pattern occurs when the 50-day Simple Moving Average (SMA) falls below the 200-day SMA.  The last death cross pattern occurred on January 2016 but did not provide a major move lower.  We did see weakness for a couple of weeks, but shortly after a strong bullish reversal.

As stocks try to finish year on a positive note and above the 24,375 level, thin conditions will likely provide choppy price action.  To the upside, 25,100 remains critical resistance, followed by 25,600.  To the downside, the December 10th low at 23,894 is important support.  Deeper support could come from the 23,200 level.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya