Technical Analysis DJI : 2019-10-03

[IFC Markets]

Declining ISM manufacturing index bearish for DJI
Manufacturing sector in US contracted for second straight month in September. Will the DJI stock index continue declining?

Weak US data lately spurred concerns economy may be on verge of slipping into recession. ISM’s index for manufacturing declined from 49.1 to 47.8 in September, the worst reading since June 2009. The forecast was 50, readings below 50 indicate contraction. While new orders for manufactured goods fell for the second month in a row, the contraction slowed. And the export orders reading was the lowest since March 2009. Earlier report indicated durable goods orders growth slowed to 0.2% over month in August 2019, following an upwardly revised 2% growth in July. Slowing manufacturing activity is bearish for US equities.

On the daily timeframe DJI: D1 is falling toward the 200-day moving average MA(200).

• The Donchian channel indicates downtrend: it is narrowing down.
• The Parabolic indicator has formed a sell signal.
  
• The MACD indicator gives a bearish signal.
  
• The RSI oscillator is level below 50 mark and has not reached the oversold zone.

We believe the bearish momentum will continue as the price breaches below the lower boundary of Donchian channel at 25968.20. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the fractal high at 27061.20. After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop loss level (27061.20) without reaching the order (25968.20), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary


Order Sell
Sell stop Below 25968.2
Stop loss Above 27061.2