Dow Jones Taps New Record Highs on US-China Phase One Deal

The Dow Jones finished yesterday’s trading with a 100.5-point or 0.36% gain at 28,235.9 thanks to risk appetite.

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Gains were led by UnitedHealth with a 2.29% profit. It was then followed by Pfizer with 2.11%. In third was Apple with a 1.71% gain.

On the other hand, Boeing had the biggest loss in yesterday’s trading at -4.29%. The stock dropped as the company confirmed that it will be reducing its production of the Boeing 737 Max starting in January. The only other stocks which incurred losses were: American Express (-0.83%), Intel (-0.16%), Walgreen (-0.14%), Caterpillar (-0.12%), and IBM (-0.06%).

US-China Phase One Deal

Risk appetite stemming from the phase one deal between the US and China continued to sustain gains on the Dow Jones. On Friday, it was announced that the US will not imposed the additional tariffs which were initially scheduled to take effect last Sunday, December 15. On top of that, existing tariffs on Chinese goods will be rolled back. China has agreed to buy up to 200 billion USD-worth of US goods for the next two years.

Better-Than-Expected US Data

It also helped that economic reports yesterday confirmed the Fed’s optimism on economy. The manufacturing sector continued to grow during the month of November. The reading was above the 50.0 baseline figure which indicates growth. It printed at 52.5 but missed the forecast at 52.6. Meanwhile, Markit reported that the services PMI topped expectations at 52.2 versus 52.0 forecast.

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Dow Jones Outlook

Looking at the 4-hour time frame of Dow Jones CFDs, we can see that the stock index closed at its previous highs around 28,212.5. The price also coincides with the 23.6% Fib level when you draw the Fibonacci retracement tool from the low of December 12 to yesterday’s high. The stock index has some room to trade lower with a rising trend line providing potential support (from connecting the higher lows of December 3, December 12, and December 13.

If the 23.6% Fib level does not hold, you can watch out for the area around 28,092.9 because this is where the trend line and the 50% Fib level look to coincide. A break below the trend line could mean that the next support level will be around 27,714.0. This is where the stock index made lows on November 20 and December 10.

On the contrary, if there are enough bids at 28,200.0 we could see the Dow Jones rally to new historic highs beyond 28,331.9.

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