Dow moves higher following earnings kickoff

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.

Risk-on is on for the financial markets with prices for the Dow settling above its previous 1st Resistance level. This has given conformists a buy-breakout strategy that has some but not much to cheer about and is doing little to shift its current overview that although has been averaging back, is moving within a larger context.

Nearly all US sectors finished the session in the green with consumer discretionary and tech on top, and the latest figures for component JP Morgan showed a significant drop in earnings. Overall, it was one of only two Dow components in the red for the session. Boeing finished on top followed by Walmart and American Express.

As for earnings, it continues for financials with components Goldman Sachs and non-components like Citigroup, Morgan Stanley, and Wells Fargo. Outside financials, component UnitedHealth will also be releasing its figures today.

US economic data showed PPI (Producer Price Index) was hotter than expected at 11.2% year-on-year and 1.4% month-on-month, its core which excludes energy up 9.2% and 1% respectively also besting estimates. We've got retail sales, preliminary consumer sentiment out of UoM, central bank member speak, and more tonight.

Over in the bond market, yields were in retracement and more so on the shorter end. The spreads of the 10Y against the 2Y, 3Y, 5Y, and 7Y are now all back in positive territory and market pricing for Federal Reserve rate hikes are close to being fully priced in for 50 basis points in May and June, but barely for July with year-end pricing also pulling back a bit.

Dow Technical analysis, overview, strategies, and levels

IG client* and CoT** sentiment for the Dow

In sentiment amongst retail traders, the price gains have shifted the bias back into majority short territory from what was 50/50 yesterday. Amongst the remaining key indices, they remain in heavy sell territory for the FTSE 100 and Australia 200 (ASX 200), and majority buy in the US 500 (S&P 500), Germany 40 (DAX 40), and US Tech 100 (Nasdaq 100).

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.