The Dow Jones index rose comfortably above its 50-day moving average during the last two days, switching the short-term outlook to bullish again. However, Monday saw some selling and profit-taking, dragging the index lower during the London session. At the time of writing, it was down 0.35 %, trading at around 35,200 USD.
Weak Chinese numbers
Sentiment in the markets deteriorated notably, following weaker-than-expected Chinese macro numbers. Chinese GDP for the third quarter slowed markedly to 4.9% annualized, down from 7.9% in the previous quarter. Industrial production also came out much lower than forecast, printing 3.1%, way below analysts’ expectations of 4.5%, and down from 5.3% in the previous month. However, Chinese retail sales surprised to the upside and printed 4.4%, up from 2.5% in August.
Traders might pay attention to the US industrial production data due later in the day . Industrial production is expected to decline notably and effectively halving to 0.2% in August, down from 0.4% recently. Capacity utilization figures will also be released, but they normally don’t cause any market volatility.
Additionally, the US monthly budget statement will be published , summarizing the financial activities of federal entities, disbursing officers, and Federal Reserve banks.
More data will be released tomorrow, including the US building permits and housing starts for September.
As we have said many times, the fundamental long-term situation remains bullish for US equities since the Fed is in no hurry to exit its ultra-loose monetary policy. The market now expects the Fed to hike rates by September 2022 and finish its tapering process by July 2022. However, equity markets look resilient, and traders largely ignore the hawkish shift at the central bank. Therefore, the latest correction now looks like another buying opportunity.
Daily chart turns bullish again
Technically speaking, the significant support now remains near 34,900 USD, where the 50-day moving average is located and is converged with previous highs. As long as the Dow Jones Index trades above it, the short-term trend seems bullish .
Should the index decline below its 50-day average, we could see another leg lower toward the 34,600 USD support zone. In that case, the short-term bias could change back to bearish.
However, it looks like the recent correction in stocks might be over since all of the major indices jumped above their contemporary bearish trend lines , indicating a possible leg higher in the following days.
In that scenario, the next target for the Dow Jones index could be set at the current all-time highs, seen at around 35,600 USD.