DOW Tests Downside Support Amid New Trade War Fears

The Friday open has the U.S. indices trading deep in the red. Following U.S. President Trump’s Thursday afternoon announcement of a fresh round of tariffs on China, equities players are bailing out of longs in masse. For the first half-hour of trade on Wall Street, the DOW is off over 175 points and the S&P 500 down 13.

While the selloff is not the crash of the century, it does illustrate where popular sentiment lies. Amid tightening policy by the FED and a potential trade war with China, the outlook for many U.S. companies is changing dramatically. Among the hardest hit this morning are Boeing and Caterpillar. Tech stocks are also struggling, with the NASDAQ off 50 points.

Is this the beginning of a prolonged correction or simply portfolio management ahead of the weekly close?

DOW Technicals

September E-mini DOW futures sold off heavily during the overnight, with bearish sentiment being fueled by the tariff announcement. The Wall Street open has brought a reprieve, with price bouncing off of 25000 in the early going.

In an update from Tuesday, I outlined a long trading plan for September DOW futures. The recommendation was successful, cashing in 61 ticks. At press time, the DOW is trading just above a key area of support. Here are the numbers to watch as today’s session unfolds:

• Support(1): Psyche Level, 25000
• Support(2): 38% Retracement, 24977
• Support(3): Bollinger MP, 24920

Overview: Currently, the DOW is testing robust technical support on the daily time frame. The zone from 25000 to 24920 will attract buyers and likely put up a solid fight. This area is a premium spot to join the prevailing uptrend in U.S. equities.

Odds are that today’s bearish pressure is a minor news-driven move. In the event that we see intraday selling become exhausted around the 24977 level, then a long position will be in play for early next week. Be sure to check back for details on how to get in on the action.