Dow 30: Futures steady ahead of more earnings this week
Record high keeps its technical overview bullish, while in sentiment both clients and CoT speculators remain on opposite ends and move further apart.
Mixed data, earnings from financial heavyweights, and record highs for a couple key indices
A few items to digest last Friday out of the US following the hotter CPI (Consumer Price Index) readings for the month of September, and the story was mixed for PPI (Producer Price Index) during the same period where month-on-month (m/m) headline was flat and lighter than the anticipated 0.1% growth, while core was in line with estimates up 0.2%. The year-on-year (y/y) prints were higher than forecasts up 1.8% and 2.8%, respectively. The preliminary figures out of UoM (University of Michigan) for October were also mixed, consumer sentiment with a surprise drop from 70.1 to 68.9, and in terms of inflation expectations rising for the 12-month from 2.7% to 2.9% but falling a notch for the five-year from 3.1% to 3%.
The data was certainly noted, but there were also Q3 earnings from a few of the financial heavyweights including JPMorgan Chase beating on both earnings and revenue, Wells Fargo besting on earnings but a miss on revenue, and an increase in AUM (assets under management) for BlackRock. Financials as a sector outperformed on Friday in a session that saw record highs for both Dow and S&P 500.
Week Ahead: More earnings, more FOMC members speaking, and retail sales
As for the week ahead, we’ve got plenty more to digest on the earnings front and includes Bank of America, Goldman Sachs, UnitedHealth, and Johnson & Johnson tomorrow, Morgan Stanley on Wednesday, Netflix on Thursday, and Procter & Gamble on Friday. There are several FOMC (Federal Open Market Committee) members speaking this week, though they aren’t needed to push back against market pricing given it has priced out a 50bp (basis point) rate cut in November and is showing more controlled reductions over next year (according to the CME’s FedWatch). In terms of US economic data, lacking today with a holiday that’ll see the bond market closed but not the stock market, trade pricing data for the month of September on Wednesday preceded by the weekly mortgage applications, retail sales and claims on Thursday, and more out of the housing sector on Friday.
Dow Technical analysis, overview, strategies, and levels
There’s been no change in the technical overview for the Dow in both weekly and daily time frames, matched as ‘bull average’ and where there are plenty of technical indicators bullish but more so on the weekly time frame due to oscillations on the daily. Price is above all its main weekly (and daily) moving averages, at the upper end of the Bollinger Band, on the DMI (Directional Movement Index) front a sizable margin for the +DI over the -DI, an ADX (Average Directional Movement Index) not far off trending territory, and its RSI (Relative Strength Index) only just beneath overbought territory.
And while the index has been moving higher and enjoying a record close, there’s still the matter of upside follow-through beyond the weekly 1st Resistance level for conformist buy-breakout strategies even if it lacked a trigger for contrarian sell-after-reversals last week. Narrower daily levels have meant conformists have had more to cheer about in the shorter-term time frame on moves beyond the 1st Resistance last Friday and Wednesday.
| Current Technical Overview | Bull Average |
| Technical Overview Conformist Strategies | Buy 1st Support After Significant Reversal, Buy 1st Resistance Upon Breakout From Below |
| Technical Overview Contrarian Strategies | Sell 1st Resistance After Reversal, Sell 1st Support Upon Breakout From Above |
| S/L for 2nd Resistance | 44339 |
| 2nd Resistance | 44039 |
| S/L for 1st Resistance | 43739 |
| 1st Resistance | 43438 |
| Relative Starting Point | 42838 |
| 1st Support | 42238 |
| S/L for 1st Support | 41937 |
| 2nd Support | 41637 |
| S/L for 2nd Support | 41337 |
Source: IG
IG client* and CoT** sentiment for the Dow
Record highs are pushing IG client sentiment further into extreme sell territory as shorts hold while longs get enticed into closing out, and has seen week-on-week bias move from 84% to 87%, the highest sell bias among them in the six indices (Dow, S&P, Nasdaq, FTSE, DAX and ASX).
CoT speculators are an opposite majority buy and just shy of extreme long territory taking it up a notch from 76% to 77% in the latest report released last Friday, though there were reductions in both long and short positioning, in absolute terms larger for longs (by 4,560 lots) than shorts (by 1,796) but not in percentage terms.
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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