DJIA pressured below monthly double tops and daily trend line support towards the 76.4% Fibo of Oct 2018 decline

• The Dow Jones Industrial Average DJIA dropped  69.16 points, or 0.3%, to 25,916.
• The S&P 500 index lost 7.89 points, or 0.3%, to 2,784.49.
• The Nasdaq Composite Index declined 21.98 points, or 0.3%, to 7,532.53.  

Markets were in a slight risk-off mood on Thursday following Trump’s failed further attempts to have North Korean leader Kim Jong Un to denuclearise where he walked out on a meeting with him. Not even the US GDP data could flip the mood, superceded by the Chinese data miss, a reminder that Chinese growth is indeed receding and likely to affect the outlook for global and US growth.  

“US Q4 GDP was surprisingly resilient at 2.6% annualised (vs 2.2% expected), despite the steep slowing in activity implied by partial data especially in the month of December. Personal consumption slowed as expected but the business investment was solid and inventories and government were both marginally on the stronger side too – the latter two not expected to have added much to growth given inventories made an outsized growth contribution in Q3 and given the shutdown that began in late Dec,” analysts at Westpac explained.  

View on China

Chinese NBS manufacturing dropped to 49.2 in February from 49.5, falling deeper into contraction territory. “In China, our view is that the key driver of the growth slowdown has been the administration’s aggressive deleveraging policy, not US-China trade tensions. Although January was a bumper month for total social financing (TSF) growth, we do not believe this marks a return to an indiscriminate credit boom,” analysts at Standard Chartered argued.

DJIA levels

Bears are chipping away at the downside en-route to test the key 25795 and 25760 area with risks of a continued correction down to 76.4% Fibo retracement of the Oct downtrend at 25668; A level, if triggered, that could spark off a bout of major profit-taking towards the 25000 level on a breach of the 23.6% Fibo retracement of the late Dec to YTD highs range. On the flipside, bulls can look to 26200 as the Nov 7th swing highs ahead of a full recovery to 26951.