Top 3 Reasons Behind S&P500 and DJIA Sell-off – Key Levels to Focus

Posted Wednesday, May 16, 2018 by
Arslan Butt

The U.S. stock market indices dipped in the wake of disappointing fundamentals. In this update, we are going to see key reasons behind sell-off and key trading levels to watch this week…

 

Top 3 Reasons Behind Bearish Trend

 

1 – U.S.- China Trade Sentiment 

First of all, investors seem worried about a lack of development in the U.S. and China trade talks. Both of the economies are still “very far apart” on resolving trade disputes. The uncertainty among investors is leading them to look for less risky investments.

 

2 – Disappointing U.S. Retail Sales 

The U.S. retail sales rose at a moderate pace of 0.3% in April, compared with a forecast of 0.5% and 0.4% surge in March. Logically, drop in sales lead to drop in earnings and profits. So, ultimately, companies may pay fewer dividends to shareholders. Would you invest in stocks for fewer dividends? That’s it, the investors seem to move on to other investments.

 

3 – 10 Year Bond Yields 

Most of the bearish trend initiated after the benchmark 10-year Treasury yield crossed above 3% after completing 38.2% retracement. Since government bonds are safe investments and for the moment these are paying off higher premium, the traders are switching from their investments in stocks to bonds.

 

 

S&P500- SPX- Trading Levels

Support     Resistance 

2726.22       2738.92

2722.29       2742.85

2715.94        2749.2

Key Trading Level:    2732.57

 

DJIA- Dow30 – Trading Levels

Support     Resistance

24868.41      24969.01

24837.34      25000.08

24787.04      25050.38

Key Trading Level:    24918.71

 

Investors are advised to monitor the U.S. Industrial Production m/m and Capacity Utilization Rate figures. The positive data can support the sinking equities today. Good luck!

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About the author

Arslan Butt is our Commodities & Indices Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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