DJIA slips back into highly negative territory on key week; investors bracing for rollercoaster ride

• The Dow Jones Industrial Average DJIA, bearing the brunt of the pessimism on Monday, lost 208.98 points, or 0.8%, to close at 24,528.22.  
• The S&P 500 index fell 20.91 points, or by 0.8%, to 2,643.85.
• The Nasdaq Composite lost 79.18 points, or 1.1%, to close at 7,085.68.

Wall Street's benchmarks finished in the red on Monday, with the DJIA moving back into highly negative territory on a technical front, in the wake of disappointing earnings from bellwether Caterpillar Inc. Investors are bracing themselves for a busy week with some geopolitical and economic catalysts slated throughout the calendar. The week will also be packed with earnings. Sino/US trade talks will take the limelight considering the strong correlation between China's economic performance and equity market with US stocks.

While the consumer may well be benefiting to some extent with China's stimulus, China’s economy slowed for an eighth straight month in January, according to Bloomberg, as weaker global demand and decelerating factory inflation combined to undercut growth.

"That’s the signal from a Bloomberg Economics gauge aggregating the earliest-available indicators on business conditions and market sentiment. The data suggest the government’s stimulus efforts have yet to translate into more business activity so far in the first quarter, after the economy notched its slowest expansion since 2009."

“The economy is still decelerating, but at a slower pace,” said David Qu at Bloomberg Economics in Hong Kong. “Concerns over global trade and fragile confidence continue to weigh on the economy.”

However, according to analysts at Bank of America Merrill Lynch, “of the 19 companies that mentioned China on earnings calls, two-thirds saw positive trends in that segment, while only one-third cited weakness."

DJIA levels

The index is struggling at the 61.8% Fibo retracement of the Oct 2018 decline. We now have a daily double top on the 17th and 24th Jan. Bears have been rejected there due to the confluence of the 100 and 200-D SMA. The bearish bias is underpinned by the death cross, (50 crossed below the 200 D SMA mid-Dec), and has solidified on the daily candlesticks. RSI and MACD are both leaning with a bearish bias now. A significant correction in the index will now target 9th Jan swing high at 24025. On the flip side, the 25000 round level above the confluence of the 100/200-D SMA and the 61.8% Fibo of the Sep decline will need to give out to avert downside pressures.