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DJIA Outlook - ‘L Shaped’ China Recovery Better Than Hard Landing

DJIA ended last week on a softer note, although losses were moderate, courtesy of Friday's rally. Major European markets are trading on a strong footing today.

Chinese equities slumped more than 2.5% after government mouthpiece said the nation is likely to see an "L shaped" recovery. An L-shaped recovery means a plunge in key economic measures followed by a period of flat growth.

However, European equity markets are not worried about the "L shaped" recovery. Moreover, such a recovery can be termed as more desirable than a hard landing, and thus bodes good news for the markets. No wonder then the Dow futures are indicating the index is likely to open 38 points or 0.22% higher on the day.

Technicals

Daily Chart

Pattern - Possible head and shoulder

Support - 17,648, 17,587, 17,492

Resistance - 17,811, 17,901, 18,000

  • Sharp rise on Friday has increased odds of prices extending gains this week towards 17,900 are, where a failure could result in a head and shoulder formation.
  • As for today, sideways to positive action could be seen, given the hourly 50-MA (despite being breached) is still sloping downwards.
  • On the downside, 17,651 is a support to watch out for, which of beached would expose 17,590 levels.