DJIA popped and dropped back into negative territory to 26,057.98, eyes on 50% mean reversion level

• The Dow Jones Industrial Average DJIA shed 33.97 points to 26,057.98.
• The S&P 500 index lost 2.62 points to 2,793.49.
• The Nasdaq Composite Index fell 5.16 points to 7,549.30.

US stocks were, for the best part of the day, flirting with a positive close. However, in the final hours of the session, stocks dropped and left the benchmarks in negative territory.   House price data weighed on the growth outlook,   and despite Powell’s balanced testimony which left prospects of a  Fed in 2019 highly unlikely, there was no bullish follow-through in the indexes.  

“Powell stressed that the economy still remains strong and that policy will remain data dependent as the outlook evolves. The Fed is also ready to adjust balance sheet normalisation if needed. Risk markets took the testimony in their stride, but weak US housing data remains a worry. Fixed income markets again took heart from the Fed’s patience with the US 10-year yield dropping 3bps to 2.64%,” analysts at ANZ Bank explained.  

DJIA levels

There have been warning signs for the bulls, from technical indicators moving along sideways to failures to hold above the Dec swing high at 26070  with any conviction. The index has morphed into a phase of consolidation at this juncture with risks of a correction down to 76.4% Fibo at 25668; A level, if triggered, that could spark off a bout of major profit-taking which would leave the 50% mean reversion level at risk. An additional bid and extension in the rally would likely look to 26277 as the Nov 7th swing highs ahead of a full recovery to 26951