Dow finishes higher following Fed’s hawkish tilt
Economic data on offer and Evergrande’s offshore payment deadline in focus.
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A more hawkish US Federal Reserve (Fed) last night where should ongoing progress continue, and the much quoted "may soon be warranted" when it comes to tapering signaled a November announcement in play with an ending of the asset purchase program in mid-2022, putting it in line with prior expectations of a $15 billion reduction ($10 billion Treasuries, $5 billion in mortgage-backed securities) per month as the rate of unwinding. More members penciling in a rate hike for 2022 making it a 9-9 split, and more rate hikes overall for 2023 and 2024.
Housing data showed existing home sales drop and nearly match estimates, mortgage applications up 4.9%, and we’ve got preliminary manufacturing and services PMIs (Purchasing Managers Index) today, preceded by unemployment claims.
Outside the US, Chinese property giant Evergrande’s on-shore bond payment news is considered a plus but avoiding the larger offshore dollar bond can still put risk assets into volatile moves even if it has a 30-day grace period if it misses that payment.
Dow technical analysis, overview, strategies, and levels
For equities, it was a strong session in terms of risk appetite that took the Wall Street beyond its previous first and second resistance levels, conformist breakout strategies outperforming with (thus far) a move that's taking it back to its lowered average, further away from the widened lower end of the band with an ADX (Average Directional Movement Index) reading that's rising.
Cyclicals as a sector outperformed, and in component performance put Boeing Co (All Sessions), Chevron Corp (All Sessions), and financials like American Express Co (All Sessions) and Goldman Sachs Group Inc (All Sessions) on top, only a handful in the red where it was mostly health stocks.
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|Current technical overview||Consolidation - Volatile|
|Technical overview conformist strategies||Buy first resistance upon breakout from below, sell first support upon breakout from above|
|Technical overview contrarian strategies||Sell first resistance after reversal, buy first support after reversal|
|S/L for second resistance||34803|
|S/L for first resistance||34586|
|Relative starting point||34260|
|S/L for first support||33934|
|S/L for second support||33717|
IG client* and CoT** sentiment for the Dow
Retail bias as a result of the price drop has fallen from 62% to 56%, still majority buy albeit closer to slight long territory, and near exact opposite CoT (Commitment of Traders) speculators at a majority short 58% as per last Friday’s report.
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.
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