Dow 30: Futures little changed after another week of gains

More Fed members speak; and mostly worsening data

More members of the Federal Reserve (Fed) spoke late last week. Goolsbee discussed the "golden path" to 2%, avoiding a recession, but emphasised keeping a vigilant eye on housing inflation. Cook expressed the possibility of a soft landing, albeit uncertain. Collins advocated for patience currently but stressed the need for monetary policy to maintain a restrictive stance for some time.

On the data front, the housing sector reported building permits and housing starts for October, surpassing forecasts and previous readings. However, a weakening print from the NAHB took it to lows unseen in nearly a year. Trade pricing data fell below forecasts, industrial production reversed, and there was an increase in claims.

Market dynamics and financial trends: a week of positive closures and bond market shifts

Key stock indices closed the week positively, with gains attributed to lighter US Consumer Price Index (CPI) readings. Notably, large-cap stocks didn't outperform this time. Another positive note was the avoidance of a government shutdown. Energy prices experienced a week-on-week drop, aligning with generally weaker economic data within the 'bad news is good news' narrative.

In the bond market, Treasury yields retreated week-on-week, with the 10-year closing below 4.5%. In real terms, the 5Y through 30Y averaged closer to 2.2%, down from 2.3% at the start of the previous week. Breakeven inflation rates experienced a dip. According to CME's FedWatch, market pricing indicates the majority expects the first rate cut from current levels in May of next year.

Week ahead: key data releases, including FOMC minutes

As for the week ahead, the holiday on Thursday in the US is set to bring a few things forward and postpone an item. Minutes from the latest FOMC (Federal Open Market Committee) meeting will be released tomorrow instead of Wednesday, following its most recent hold that came with a slightly dovish tweak but at times hawkish speak thereafter, pushing back against market pricing looking to dent its 'higher for longer' narrative.

Housing sector and economic indicators: navigating a story of pullback

A couple of items from the housing sector, with existing home sales on the same day for the month of October, tell a story thus far of a pullback, and mortgage applications the following day. Weekly claims will be on Wednesday after their unexpected increase last time around for both initial and continuous. Durable goods for October will also be released after a strong September print, along with the revised figures out of UoM (University of Michigan) following the uptick in consumer inflation expectations in both the 12-month and five-year preliminary readings and a clear upset in consumer sentiment.

Navigating manufacturing stability: focus on preliminary PMIs

Preliminary PMIs (Purchasing Managers’ Index) out of S&P Global will be on Friday, with a focus on whether the manufacturing sector can avoid falling back into contraction. Anxious bond market traders will be processing a couple of auctions today and tomorrow. In earnings, Zoom is today, but far more important with AI fund flow implications (even if preoccupied with the OpenAI drama over the weekend) is the last of the ‘magnificent seven’, Nvidia, expected to report tomorrow. Both aren’t components of this index.

Dow technical analysis, overview, strategies, and levels

It was last Tuesday's action, following lighter pricing data, that took price across its previous weekly first resistance level - lacking a trigger for cautious conformists and favoring contrarian buy-breakouts with a move past it. However, still within its second resistance, and another key technical indicator on the weekly time frame, tilting into the green. It's more interesting on the daily time frame ,that isn’t far off a shift to 'bull average' when ignoring price-indicator proximity. Last Thursday's first support managing to hold but lacking a trigger for cautious conformist buy-after-significant reversals.

IG client* and CoT** sentiment for the Dow

As for sentiment, an increase in price usually causing sell bias to rise, as shorts initiate, and longs are enticed into closing out. Retail traders have opted to reduce their heavy sell sentiment, from 67% at the start of last week to 65% at the start of this week instead. CoT speculators are also little changed w/w and still in heavy sell territory, a drop in longs (by 1,816 lots) and shorts (by -2,379) taking the sell bias in percentage terms a notch higher to 73%.

Dow chart with retail and institutional sentiment

• _{*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the start of last week.}
• _{**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.}