Dow Jones, Nasdaq 100, Russell 2000 Forecasts:
- A phase one trade deal seems unlikely to materialize before 2020, if at all
- A broken channel on the Dow Jones could open the door to further losses down to 27,400
- Similarly, the Nasdaq 100 and Russell 2000 will seek nearby support
Dow Jones, Nasdaq 100, Russell 2000 Forecasts: Watch out Below
The Dow Jones fell under pressure on Wednesday after Reuters released a report that argued a US-China phase one trade deal is not likely until 2020. In my opinion, any trade deal prior to the 2020 elections is extremely unlikely after China expressed a willingness to wait until President Trump’s reelection is confirmed or denied. Consequently, any potential trade deal would likely see the United States make concessions – an idea that has been met with bipartisan resistance in Washington.
Top Retail Stocks to Watch Ahead of Black Friday
While the trade war looks to continue indefinitely, the Fed’s accommodative policy and that of the other major central banks could still look to bolster equities in the longer-term. In the immediate future, however, equities could fall further as the market adjusts their trade expectations and recent gains are consolidated.
Dow Jones Price Chart: 4 - Hour Time Frame (October 2019 – November 2019) (Chart 1)
In the case of the Dow Jones Industrial Average, a break beneath the ascending channel from early October has effectively opened the door lower. If bearishness continues, the Industrial Average may enjoy a modicum of support at 27,550, but the more important level to watch is likely 27,400 and the 200-period moving average beneath.
Nasdaq 100 Forecast
Turning to the Nasdaq 100, nearby support will look to reside at the top of an ascending channel from prior highs around 8,175. While the area may offer a degree of support, the lower-bound of the channel and the 200-period moving average around 8,075 could look to provide sturdier resistance to a move lower before the 8,000 psychological level comes into the frame.
Nasdaq 100 Price Chart: 4 – Hour Time Frame (July 2019 – November 2019) (Chart 2)
Russell 2000 Forecast
While the Dow Jones and Nasdaq 100 have fallen from all-time highs, the Russell 2000 never had the pleasure of enjoying such heights. Instead, the small-cap equity index has been trapped beneath a horizontal band of resistance that has kept a lid on price for the entirety of November. In the past, I argued the Russell’s inability to break higher was a worrisome sign, which could eventually see the RUT retrace lower. Now, risk assets have been offered a bearish catalyst, but the Russell remains within the band.
Russell 2000 Price Chart: Daily Time Frame (October 2017 – November 2019) (Chart 3)
Evidently, bears and bulls have reached a deadlock at this level, but given the broader equity pressure I would eventually expect the RUT to fade lower before breaking out. To that end, the Russell could look for buoyancy around the 1,550 level where the 200-day moving average resides. A bounce off this level followed by subsequent probing around 1,600 could provide the consolidation required for a bullish break higher, something I will keep an eye on as price action unfolds.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
