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Dow death cross pattern is nearing

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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.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. 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. Prior to OANDA he worked with TradeTheNews.com, 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, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
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