Instead of giving market confidence a boost, Fed’s surprised -50bps rate cut overnight seemed to have knocked down sentiments instead. DOW closed down -2.94%, S&P 500 dropped -2.81% or 785.91 pts, NASDAQ lost -2.99%. 10-year yield broke 1% handle to new record low of 0.908, before closing at 1.010, down -0.078. Asia markets are mixed for now, with Nikkei flat, Hong Kong HSI down -0.80%, China Shanghai SSE flat, Singapore Strait Times down -0.36%.
With breach of 25859.60 minor support, DOW’s recovery from 24681.01 appears to have completed at 27084.59, after rejection by 50% retracement level. But for now, we’re not expecting the steep decline from 29568.57 to resume yet. Instead, DOW will likely gyrate towards 24681.01 low and recover from there to extend the consolidation pattern. In case of another rise, upside should be limited by 61.8% retracement at 27701.52.
When we talked about 0.8248 as downside target in 10-year yield back in late February, it looked a bit exaggerated. But it’s now suddenly so close. For now, we’d expect strong support from this 61.8% projection of 3.248 to 1.429 from 1.949 at 8.248 to contain downside to bring recovery. But even in that case, we’re not seeing any chance of a break back above 1.429 support turned resistance soon.
