Dow finishes higher as earnings and data boost risk appetite

Sign up for IG's Daily and Weekly Market Report to receive this information and more, in an elaborate and comprehensive report recounting the forex majors, commodities and indices before the European open.

A decent risk-on move in yesterday’s session that helped power key indices including the Dow 30 to a higher finish. All sectors finished yesterday's session very much in the green, where financials and industrials lead, and there were sizable enough gains for tech, communication, and consumer discretionary.

Earnings from Dow 30 component Nike the day before sent its share price surging and finished on top enjoying the largest percentage gains, and non-component FedEx also beat earnings and revenue estimates even as weak demand remains a concern.
Treasury yields were in for slight declines across the curve with a bit of follow-through for some as of writing this morning, in real terms a bit lower, and breakeven inflation rates rising for three consecutive sessions, with rate hike likelihoods (CME's FedWatch) still pointing on a terminal rate out of the US Federal Reserve beneath 5% and rate cuts in the second half of next year.

As for US economic data, it showed CB's (Conference Board) consumer confidence improve sizably to 108.3 with its previous revised higher to 101.4, and on the housing front mortgage applications rose 0.9% while existing home sales dropped 7.7% m/m (month-on-month) for November with a 4.09m reading. GDP (Gross Domestic Product) and more will be on offer today, and both durables and the closely watched PCE (Personal Consumption Expenditures) price index tomorrow.

Dow Technical analysis, overview, strategies, and levels

Its previous 1st Resistance level only initially held offering far less for conformist sell-on-reversals that were stopped out on the move higher thereafter that meant far more for contrarian buy-breakouts. A couple at-risk technical indicators have tilted in the process, and by one calculation a positive DMI (Directional Movement Index) cross occurring.

The overview in the daily time frame remains consolidatory, though noting the uptick in volatility that has in some sessions tested conformist reversal strategies on prices at times getting past key short-term intraday levels. Tomorrow’s fundamental PCE price index event usually involves more volatility depending on how far results veer far from expectations, and should be taken into account as the release usually involves levels having less of a chance of holding.

IG client* and CoT** sentiment for the Dow

As for sentiment, the rise in price has taken retail trader bias from slight sell 54% and closer to heavy sell territory at 63%. It stands not far off last Friday’s CoT report where they were short 61%.

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.