The decline in the US stock market doesnt yet look like a threat

Sales in the US stock market are not yet mass and panic. Yes, on Monday the preassuren was quite tough: the technological index of S & P technology lost almost 3%, and the shares of FANG lost from 3% to 6%.

Nevertheless, if you look at the daily chart of the Dow Jones index, you can see that nothing is happening yet. The index fluctuates in the range of 23400-25400, which, in fact, it has been doing for more than six months. From this point of view, the current decline is an opportunity for purchases at the bottom of the range. At least until the Dow Jones Index is above 23,400.

Returning to the events of Monday, we note that local panic was provoked by information that the US Treasury is developing restrictions aimed at prohibiting companies in which the share of Chinese owners is 25% or more, to acquire US firms engaged in important industrial technologies. In addition, the Wall Street Journal also reported on the US plans to further block exports to prevent technology leakage into China. Smoke without fire, of course, does not happen, but the head of the Treasury Stephen Mnuchin said that the markets misinterpreted the position of the ministry and it was not a fight with China, but the formation of general rules for working with any country.

So, is there a real threat of a breakdown of the lower limit of the 23400 range and the formation of a downtrend? So far, we have not seen it. American corporations have not yet experienced the effects of trade wars, but at the same time feel the results of Trump's tax reform, as well as the overall excellent shape of the US economy.

In addition, the earnings season is not far off. The active phase begins in mid-July. Recently, it was financial results of American companies that provided serious support to the stock market and did not allow indexes to decline. Recall that the past earnings season in the US was simply magnificent: over 80% of the reporting companies index SP500 exceeded the forecasts of analysts. On average, the excess of earnings forecasts was 7.85%. This is the best result in history. And we do not see why the results of the last quarter should be a failure.

Total, the current decline in the US stock market is a good opportunity for purchases cheaper. Purchases are relevant, if the Dow Jones Index is above 23400, that is, while the lower bound of the range is holding - it does not allow the downward movement to gain strength and form a local trend. As for the goals, the minimum is the upper limit of the range - 25400, but in case of successful earnings season, it may well be broken.