US stocks stage a very strong rebound today with DOW trading up over 400 pts at the time of writing. Fed Chair Jerome Powell’s short comments on current outlook and policy seemed to be the trigger. Markets believed that Powell signaled his openness to rate cut.
This is the exact quote from the remarks: “I’d like first to say a word about recent developments involving trade negotiations and other matters. We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective. My comments today, like this conference, will focus on longer-run issues that will remain even as the issues of the moment evolve.
It’s firstly seen as acknowledgement on risks from “trade negotiations and other markets” And Fed will “act as appropriate” after monitoring the implications on economic outlook. That is, some saw that as a node to cutting rates if the economy worsen due to Trump’s trade wars.
Technically, it now looks like DOW has drawn strong support from 38.2% retracement of 21712.53 to 26695.96 at 24792.28. The gap resistance at 25342.28 will likely be taken out this week to confirm short term bottoming at 2480.57. The real test is on 55 day EMA (now at 25736). Before sustained trading above this EMA, we’d still favor another decline to 61.8% retracement at 23616.20 and below.
