Dow 30: Market participants brace for a week of impacting items
Technical overview remains bullish, with client sentiment reaching extreme sell while CoT speculators reduce their majority buy bias.
Decent enough US data, mixed results for key US equity indices
The last crucial piece of pricing data for the US Federal Reserve (Fed) to digest was released last week, where PCE (Personal Consumption Expenditures) price index for the month of June showed year-on-year (y/y) growth fall to 2.5% and month-on-month growth of 0.1% both matching estimates, and core slightly above some forecasts at 2.6% and 0.2%, respectively. Personal spending for the same month was up only 0.2% a miss and income growth also slowed, while the revised figures out of UoM (University of Michigan) for July showed consumer inflation expectations a notch higher for five years to 3%, and consumer sentiment still in the 66 handle.
Mixed weekly results for key US equity indices, the tech-heavy Nasdaq and S&P 500 finishing lower, small gains for the Dow and S&P 500 equal weight, and better results for the small-cap Russell 2000 and S&P MidCap 400.
Week Ahead: FOMC, Big Tech earnings, NFP
As for the week ahead, it’ll be a busy one and on multiple fronts. There’s the FOMC (Federal Open Market Committee) announcement on Wednesday where market pricing (CME’s FedWatch) is for a hold as well as fully pricing in a cut from their September meeting, and hopes are that the tone from Chairman Powell in his press conference won’t place any obstacles for a rate reduction by then else market participants will have to wait for Jackson Hole in August after digesting more data.
And speaking of US data, an abundance of it this week where it’ll mostly be about the labor market, with job openings tomorrow for the month of June having remained in the 8m handle for several months now, employment cost for Q2 the day after, claims and Challenger’s job cuts on Thursday, and the market-moving Non-Farm Payrolls on Friday. Expectations are that there was about 180K growth in the month of July and that the unemployment rate held at 4.1%, with market participants noting wage growth and any further household-establishment survey divergence. Be ready to digest more housing data, as well as manufacturing PMIs (Purchasing Managers’ Index) on Thursday to see if the sector will continue to suffer contraction according to ISM (Institute for Supply Management).
And as if that wasn’t enough to take in, there’s also earnings that includes more from Big Tech with Microsoft on Tuesday, Meta on Wednesday, and both Amazon and Apple on Thursday.
Dow Technical analysis, overview, strategies, and levels
The technical overview for the Dow remains ‘bull average’ in both weekly and daily time frames, but for the latter only last Friday offering conformist buy-breakouts proper upside follow-through that managed to stick. The key technical indicators remain bullish on the weekly time frame where it’s been a consistent positive story, but a few of those indicators have been struggling when zooming into the daily time frame on a lack of consistent gains. Either way, it hasn’t changed the conformist camp from keeping buys in it even if only after a significant reversal for those initiating off the 1st Support, while those expecting the market to hold or retreat have got sell strategies in the contrarian camp to rely on.
IG client* and CoT** sentiment for the Dow
CoT speculators are still majority to the buy side but have fallen out of heavy long territory on a larger drop in longs over shorts (longs -4,627 lots, shorts -752), the losses from late in the week before the likely catalyst in preventing momentum from piling further in and instead opting to close out. IG clients start off the week in extreme sell territory but from a higher price level compared to earlier this month.
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.
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