Dow Jones Futures Fail to Build On Rally, G-7 Eyed

The Dow Jones futures failed to build on the big rally of yesterday and are slightly down today after a round of choppy trading. Markets are now eyeing the G-7 meetings to see if there will be a hint of a coordinated response from political leaders and the central banks of these countries. The RBA delivered an expected 25bps rate cut yesterday which propped up the Aussie Dollar but not by much. 

The critical expectation that fuelled Monday’s recovery was the statements by the Fed Chair and his counterpart at the Bank of Japan, which provided hopes of a coordinated response from the major global central banks. 

This week’s G7 meetings are an emergency meeting to decide a global response to the coronavirus outbreak, which is threatening to dampen the 2020 global economic outlook. Already, PMI numbers from China and the US have been disappointing. There is genuine concern that the massive drop in factory activity will affect commodity markets, create unemployment and rattle global stock markets, some of which had their most significant declines since the 2008 global financial crisis. 

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Technical Outlook for the Dow Jones Futures

Yesterday’s recovery candle took the Dow beyond the immediate resistance at 26130, and up to the next resistance target at 26723. However, sellers quickly came into the fray and forced prices down. It has been a ding-dong battle between buyers and sellers looking for control of the price activity. 

Positive feelers from the G7 meetings may give buyers more control of the market and allow for a successful break of the 26723. Such a move would require a penetration close above the resistance by two successive daily candles, allowing the Dow Jones futures to target 27373. 28195 is a further upside target which becomes relevant if 27373 is successfully breached. 

On the flip side, failure to break the 26723 price level could lead to a retest of recent lows at 26130 and 25600 (where the lower border of the pitchfork lies). 24922 is another support level which becomes relevant if the Dow is pushed towards Friday’s lows. 

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