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US30 - Rallies Towards Key 24,000 Level as Fed Expected to Pause



US30 - Rallies Towards Key 24000 Level as Fed Expected to Pause
In the last couple of weeks the US30 index has been able to rally well back towards the key 24,000 level after falling to its lowest levels in 18 months below 21,500. December was several weeks the US30 index would rather forget as it fell very sharply down through any support at the 25,000 level and then also through the 24,000 level down to that 18 month low. It is doing well to remain within touch of this level, however many will expect the 24,000 level to offer some resistance should the index return to this level.


In late November it enjoyed a healthy surge higher climbing back above the key 25,000 level to above 26,000 before reversing sharply and falling lower. The last few months have seen the index moving sharply between 24,000 and 26,000 as the volatility and the swings back and forth intensified before the massive drops in December which was the most volatile the index has been in many years.

For several weeks in September the US30 index had been content to trade within a narrow range near 2018 highs under 26200. The 25000 level has been significant as it has offered lots of resistance and would have come as no surprise when it supported the index back in July and August of last year. Around the end of June the index spent several days consolidating above 24000 after a strong fall over several weeks prior to that and this level remains significant.

Talk continues to dominate market commentary that the Federal Reserve have softened their stance and may not raise rates throughout 2019 as they have been hinting at for some time now.  Adding to this story is that Raphael Bostic, president of the Federal Reserve Bank of Atlanta and one of the Fed’s more dovish policy makers has said that the U.S. central bank should only raise interest rates once this year but keep going with its plan to gradually shrink the balance sheet.  “Coming into this year, a year ago, I saw two moves for 2019. Right now, I’m at one move for 2019,” Bostic told the Rotary Club of Atlanta earlier in the week.  “If it’s an upside surprise, my prediction would be to go from one rate move to two, if it’s the downside it would go from one to zero,” he said.  Late last week, Fed Chairman Jerome Powell raised the possibility of putting rate rises on hold for a time as Fed officials assess the impact on the U.S. economy of stock-market losses and weaker global growth that have tightened financial conditions.  The Federal Reserve raised rates four times last year and projections from its meeting last month show officials expect two more rises in 2019.  Whilst not a voter, Raphael Bostic has argued recently that the Fed should proceed with caution in raising rates to avoid inverting the yield curve.

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