Futures point higher for the Dow with more impacting items this week

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There was plenty of economic data to digest late last week, US advance GDP (Gross Domestic Product) showing a clear miss in growth from the previous quarter at just 2%. And while there was the usual unemployment claims showing a drop that beat estimates once more, employment costs rose for Q3 by 1.3%, personal spending remained somewhat strong, personal income down 1%, and consumer sentiment out of UoM that that was little changed following CB’s improvement last Tuesday. Pricing data out of the Bureau of Economic Analysis showing the closely watched core PCE (Price Consumption Expenditure) price index grow by 0.2% month-on-month, for a year-on-year reading of 3.6%, overall up 4.4%.

On the fiscal stimulus front for the US, there was a bit of unveiling and failing when it came to new tax proposals, the “billionaires tax” not getting enough support “because of its complexity”, President Biden announcing a $1.75 trillion package in a deal reached with Senate Democrats, though has yet to win over a few needed votes. As for the coronavirus, cases above 247 million, deaths crossing 5 million, and in vaccine news FDA approval for Pfizer’s vaccine for children aged 5 to 11, Moderna saying over the weekend the FDA will need more time to assess its use in adolescents.

As for the week ahead, we’re in for another packed week of both central bank decisions and impacting economic data. Manufacturing PMIs are on offer today, weekend PMIs for China out of CFLP showing a miss for both manufacturing and services, the former in contracting territory with a 49.2 reading, while Caixin’s reading this morning for the manufacturing sector showed a slight beat and hardly expansionary (the rest of the key Asian manufacturing hubs experiencing expansion), with the remainder minus the Eurozone including US ISM. Services PMIs will mostly be on offer on Wednesday, there too expansion and above-50 readings expected for the sector. The attention will shift towards employment towards the end of the week given we’ve got US Non-Farm Payrolls with expectations of a near 400,000 reading, the unemployment rate to drop a notch to 4.7%, and wage growth to grow by 0.4%.

It’ll be preceded by the weekly Thursday unemployment claims, and the ADP’s estimate on Wednesday. But Friday’s numbers arrive too late for the US Federal Reserve’s monetary policy decision this Wednesday, where they’re expected to announce the beginning of the reduction of asset purchases. Energy remains in focus with what has been high prices, and customers on the receiving end will hope Thursday’s OPEC+ meet will result in a larger than expected unwinding of output cuts to take some of the momentum out of rising oil prices, even if there aren’t any signs that’ll be the case. There will also be more earnings.

Dow technical analysis, overview, strategies, and levels

We're back to slow and steady gains keeping a few of its key technical indicators flashing green, and a lack of a play at and beyond key levels on a failure to offer significant upside volatility, a stalling bull trend overview in both time frames. Microsoft Corp (All Sessions) (surpasses Apple Inc to become world's most valuable company) and Intel outperformed amongst its components, Apple suffering on the other end as its revenue missed estimates and supply issues cost the company $6 billion. It's relatively lighter this week in terms of earnings amongst its components.

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IG client* and CoT** sentiment for the Dow

CoT speculators are a slight buy 51% dropping a notch, long positions up by 723 lots and outdone by a 1,750 lot increase in shorts, while retail trader bias remains extreme sell in need of a retracement back down. For the remaining US indices in the report they are majority buy US 500 at 58%, slight sell US Tech 100 at 51%, and heavy sell Russell 2000 at 66%.

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.}