Wall Street rebounds strongly led by industrials and technology

  • Market sentiment improves amid easing trade war fears.
  • CBOE Volatility Index drops more than 5%.
  • DJIA touches highest level since early February.

Major equity indexes started the day on a positive note after China announced that the retaliatory tariffs would be imposed on $60 billion worth of American goods and eased concerns over the U.S. introducing additional tariffs. The CBOE Volatility Index, Wall Street's fear gauge, closed the day 5% higher to confirm the improved market sentiment.

The trade-sensitive S&P 500 Industrials Index closed the day 0.9% behind the S&P 500 Consumer Discretionary Index, which added 1.27% on the back of a more than 2% gain witnessed in Nike shares. "The trade dispute has escalated to a point where finally we're probably getting closer to a resolution. It's almost as if we're getting down to the brass tacks of both countries having not too much more room to go," Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana, told Reuters.

Meanwhile, boosted by a sharp rally seen in crude oil prices, the S&P 500 Energy Index rose 0.7%. Commenting on the latest developments surrounding the trade dispute, FXStreet Senior Analyst Joseph Trevisani said:

China and the United States are behaving in their trade dispute like diffident teenagers at a high school dance, trying to figure out a way to end up on the dance floor without either making the first move. But that they will dance is inevitable, the attraction is too strong.

On the other hand, dragged by reports of the U.S. Department of Justice starting an investigation on Elon Musk's public comments about taking the company private, Tesla lost nearly 4%.

After advancing to its highest level since early February at 26,317 points, the Dow Jones Industrial Average finished the day 186.36 points, or 0.72%, higher at 26,248.48 points. The S&P 500 added 16.01 points, or 0.55%, to 2,904.81 and the Nasdaq Composite gained 61.72 points, or 0.78%, to 7,957.51.

DJIA technical outlook via FXStreet Chief Analyst Valeria Bednarik

The daily chart for the Dow shows that it briefly pierced a bullish 20 DMA but recovered from around it, while technical indicators are gaining upward traction, the Momentum still within neutral levels, and the RSI currently at 64, leaving room for additional gains during the upcoming sessions.

Shorter term, and according to the 4 hours chart, the risk is also skewed to the upside, as the index advanced firmly above all of its moving averages which head north in the right order. In this last time frame, technical indicators lost upward strength after entering positive territory as the index retreated from its intraday high of 26,315, but the Momentum turned flat and the RSI stands at 63, far both from suggesting upward exhaustion or an upcoming decline. 

Support levels: 26,220 - 26,161 - 26,110.

Resistance levels: 26,277 - 26,315 - 26,368. 


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