DOW once again failed to hold on to initial gains and closed down -218.45 pts, or -0.91%, at 23664.64 overnight. S&P 500 dropped -0.70% but NASDAQ managed to close up 0.51%. Renewed US-China tension remains a factor limiting risk appetite. US President Donald Trump’s administration is weighing actions against China over its early cover-up and other handling of the coronavirus outbreak. The pandemic has eventually turned into, as Trump described, an attack that’s “worse than Pearl Harbor”, and “worse than the World Trade Center”.

Trump said he’s “watching closely” whether China is meeting its commitment on the trade deal phase one. “I’ll be able to report in about a week or two as to – not only with the farmers, but with many other industries also,” he added. “They understand they have a deal and hopefully they’re going to get with the deal and we’ll see. They may. They may not. We’re going to find out.” He’s threatened to pull out from the deal and go back to tariffs.

DOW’s struggle to sustain above 55 hour EMA, as well as persistent bearish divergence condition in hourly MACD are both seen as sign of topping. Indeed, it’s also possibly forming a near term head and shoulder top (ls: 24264, h: 24764, rs: 21469). Immediate focus is now on 23361.16 support before the weekly close. Break there should indicate completion of the pattern. Further break of 22941.88 support, probably next week, should confirm near term bearish reversal for a test on 18213.65 low.

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