Dow 30: Futures steady ahead of more earnings this week

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Fed member speak abundant

More Federal Reserve (Fed) member speeches to process after Chairman Powell’s comments late last week that inflation was “still too high,” and policy is currently not too tight, even if bond markets are “producing tighter financial conditions right now.” Harker spoke on “holding the policy rate steady,” Bostic on inflation being their top priority, and Goolsbee is hopeful a recession can be avoided.

Rising yields still causing concern

Otherwise, participants were on edge for updates on the geopolitical front and whether it would widen or remain contained. Oil and, more so, gold were beneficiaries last week. Key indices this time around failed to defy rising yields that finished the week notably higher, especially in real terms from the 7-year onwards. There were un-inversions, with more expected at this rate, and a notable jump in breakeven inflation rates.

Market pricing (CME’s FedWatch) for the next Federal Open Market Committee meeting is nearly fully pricing in a hold. The minority expecting a final 25bp (basis point) hike when they meet in December/January is shrinking, and the first rate cut from current levels, via a majority, is now brought back to June of next year.

On the US earnings front, it has generally been a story of beating figures, with 78% so far, slightly below the 3-year average (source: Refinitiv). Meanwhile, on the political front, there is still no House speaker.

Economic data to watch

As for the week ahead, it starts off light before we get preliminary PMIs (Purchasing Managers' Index) tomorrow out of S&P Global for this month after September's readings showed manufacturing not far off emerging from contraction and services close to entering it.

Otherwise, key readings from the Chicago, Richmond, and Kansas Fed branches, along with the usual weekly inventory and rig count data, more housing data with new home sales hovering not too far off pre-pandemic averages, while pending home sales suffered a significant drop in August.

Durables are expected to rebound from September's contraction, and advance GDP (Gross Domestic Product) for the third quarter is not a concern, with Atlanta Fed's GDPNow at 5.4%..

Market focus: PCE price index

Of course, the sum of it all could shift the narrative, but if we're looking for a sole item in terms of data that market participants will be fixated on, it's Friday's PCE (Personal Consumption Expenditures) price index. Figures are for the month of September, and expectations are it'll be 0.3% m/m growth for both core and headline.

Consumer sentiment and earnings

The revised figures out of UoM (University of Michigan) will also be released; hopes are the jump in consumer expectations in the preliminary readings won't stick. In earnings, the majority of the 'magnificent seven' will be reporting with both Alphabet and Microsoft tomorrow, Meta on Wednesday, and Amazon on Thursday.

Dow technical analysis, overview, strategies and levels

Although its previous weekly 1st Resistance level managed to hold, favoring conformist sell-after-significant reversals, the same couldn't be said for its weekly 1st Support, with a close beneath it lacking a trigger for cautious conformist buys off the key level.

The larger issue was on the daily time frame, with the successive pullbacks combined with price-indicator proximity shifting the overview there back to 'bear average'. The moves late last week caused then-cautious daily conformist buys to get stopped out, favoring then-contrarian sell-breakouts.

IG client* and CoT** sentiment for the Dow

Retail traders started off last week in the middle but following the price drop, have shifted to majority buy of 61%, as shorts get enticed into closing out and longs initiate. CoT speculators raised both longs by 486 and shorts by 1,045. The net result showed they’re still very much heavy to the sell side, and not far off extreme short territory.

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 previous trading day.}
• _{**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.}