Dow: Bracing for another week of impacting items

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Processing better pricing data

Quite a bit of data was released out of the US late last week. PCE's (Personal Consumption Expenditures) pricing figures for the month of June showed its headline reading fall back from 3.8% to 3% and its core from 4.6% to 4.1%. Both figures were beneath and better than estimates.

The month-on-month growth of 0.2% was a miss for the former and as anticipated for the latter. Consumer inflation expectations for this month matched the preliminary reading for the 12-month at 3.4%, but there was a welcoming drop for the five-year horizon by a notch to 3% according to UoM's (University of Michigan) survey. Its sentiment reading was revised lower to 71.6.

Data pointing to economic strength

The day before that showed plenty of strong prints, notable amongst them advance GDP (Gross Domestic Product) for the second quarter at 2.4%. Durables for the month of June were up a stellar 4.7%, with its core rising a smaller 0.6%, and both besting estimates. Pending home sales for the same month avoided a month-on-month (m/m) contraction. Both initial and continuous claims were also better than anticipated.

The week ahead

As for the week ahead, it’s another busier one that starts off with a couple of items of interest out of the US today. The focus will be on what the Federal Reserve’s survey of key lenders will show regarding how tight standards have become.

The momentum continues tomorrow with manufacturing PMIs (Purchasing Managers’ Index), where contracting readings are anticipated out of S&P Global and more so for ISM (Institute for Supply Management).

Services PMIs will take the spotlight on Thursday, offering insights into overall economic growth and noting whether it can remain in expansionary territory.

Employment data in focus

Plenty of items, including the usual weekly readings, but expect the attention to shift towards employment data. Tomorrow, job openings for the month of June are forecast to pull back further to 9.6 million.

On Wednesday, ADP’s non-farm estimate for July will be released. The weekly claims and Challenger’s job cuts on Thursday will also be closely watched, culminating in the market-impacting Non-Farm Payrolls (NFP) report on Friday. Expectations are that July saw growth of roughly 200K, with the unemployment rate remaining on hold at 3.6%.

Amidst the economic data, earnings season will continue to be in focus. Notable ones include chipmaker AMD tomorrow, and both (Dow 30 component) Apple and Amazon on Thursday.

Dow technical analysis, overview, strategies, and levels

Higher highs keeping its technical boxes and overview intact on the weekly time frame as a 'bull average', but in all, a lack of a play last week as it failed to reach its previous weekly 1st Resistance level.

On the daily time frame, even cautious conformist buy-after-significant reversals were stopped out in last Thursday's moves that were due to fundamental forces, with the eventual recovery on Friday testing them once more before a similar amount was on offer when compared to contrarian sell-breakouts.

IG client* and CoT** sentiment for the Dow

As for retail trader bias, it’s still in extreme sell territory and unchanged since the start of last week at 79%. And while CoT speculators were majority short when we last spoke about them, they’ve shifted then from majority sell 55% to a slight buy 52% on an increase in longs by 6,374 lots and a simultaneous drop in shorts by 3,136.

There was also a shift from slight buy to majority short in the Nasdaq 100, and they remain in heavy sell territory for both S&P 500 and Russell 2000.

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.}