Dow – Steady as the dust settles on a massive week of central bank meetings

  • Is Fed speak weighing on market sentiment?
  • Uncertainty could mount if US government shuts down
  • US30 breaks below 200-day SMA

Equity markets are pretty flat in the middle of the week, struggling to pick themselves up off the floor as investors worry about higher for longer interest rates and the economy.

Last week was action-packed and it seems investors are still piecing it all together in the absence of much else happening.

While I often refer to them as eternal optimists, when faced with the prospect of recession in Europe, a sluggish recovery in China, and a Fed that’s seemingly determined to push the economy to the edge despite huge progress already without much pain, it would appear investors are struggling to see the upside.

The only thing that can change that is the economic data providing further evidence that significant progress is continuing to be made.

But if the government shuts down, we won’t be getting that any time soon which would make the October Fed meeting interesting, depending on how long it lasts. There are potentially uncertain times ahead and as the old adage goes, markets hate uncertainty.

A key technical breakout

The US30 has been in decline over the last couple of weeks which may point to a broader sentiment shift in the markets.

US30 Daily

Source – OANDA on Trading View

What’s more, the index has broken below the 200/233-day simple moving average band which has been a key area of support over most of the past year, barring a brief breakout in March.

The breakout has also been backed by momentum which may suggest there are more downside pressures building even as it hits a three-month low.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam