Dow 30: Record close, and then came Trump’s pick for Treasury

Record close, and futures up on Trump picking Bessent for Treasury

US equity index futures are up on President-elect Donald Trump picking Scott Bessent for Treasury secretary, a hedge fund manager seen as measured and stable for investors, though prior to it all and there were decent gains last week with the Dow up 2% and back above 44K enjoying a record close last Friday, and outperforming against weekly 1.5-1.6% gains for the S&P 500 and Nasdaq.

There were a few things to digest last Friday where preliminary services PMI (Purchasing Managers’ Index) for the US improved to 57 besting estimates while manufacturing was as expected at 48.8, both avoiding the fate seen for preliminary PMIs in Europe that raised rate cut likelihoods there while it’s not far off a coin toss (CME’s FedWatch) on hold vs cut for the Federal Reserve (Fed) in their December meeting. Other data included the revised figures out of UoM (University of Michigan) that showed consumer sentiment a lower 71.8 and below 74 estimates, and where consumer inflation for the five-year forecast a notch higher at 3.2%. As for today, it’s mostly low-impacting items out of the US in what will be a shortened holiday week.

Dow Technical analysis, overview, strategies, and levels

Price gains that have taken the index to a record high has helped keep its technical overview bullish and offered a generally consistent story of gains for conformist buy strategies over contrarian ones. We’re working within a bull channel that’s visibly larger on the shorter-term daily time frame capable of shifting key technical indicators depending on where they reside within it, but closer to the top meaning price above all its main moving averages, on the DMI (Directional Movement Index) front positive thanks to a clear gap between the +DI and -DI in both weekly and daily time frames, and an RSI (Relative Strength Index) just shy of overbought territory.

Looking at the table below, and the overviews match even if the daily is more exposed than the weekly due to narrower levels and the above-mentioned larger bull channel. On the strategic front it remains buy vs sell instead of breakout vs reversal. For conformists on the daily (middle column of the table below), today’s buy-breakout off the 1^st Resistance has already occurred thanks to the gap higher, with a trigger left for contrarian sell-after-reversals should they expect the gap to get filled shorting at 44,525 with a target of the Relative Starting Point’s 44,242 and a stop loss of 44,667. Should there be a larger pullback in price to today’s 1^st Support and conformist buys have a play but ideally only after a significant reversal due to the larger channel. For the weekly time frame (right column in the table below) and interday traders will be noting the weekly 1^st Resistance level at 44,871 which has gotten much closer at the start of the week thanks to the gap higher.

IG client* and CoT** sentiment for the Dow

IG client sentiment has jumped from a heavy sell 73% at the start of last week to an extreme short 79% at the start of this week as some longs close out and sell positions get initiated, and reaching an even higher 81% following the latest price gains.

CoT speculators are an opposite majority buy but have pulled back notably from a net long 67% to 62% and no longer in heavy buy territory on a reduction in longs (by 6,648 lots) easily outdoing a smaller drop in shorts (by 534 lots). There’s also been a drop for asset managers from a net long 76% to 63% on an increase in longs (by 4,560 lots) and a simultaneous increase in shorts (by 2,836), while leveraged funds have shifted from slight buy 53% to 51%.

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 the start of this week 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.