Limiting moves in the Dow ahead of more earnings

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Relatively limiting price action occurred yesterday that was still within its short-term bear trend channel. There was a clear lack of a play for the weekly levels and would have been the case for narrowed shorter-term daily ones as well.

Bond market yields that had gaped higher were mostly in for slight retracement with the gaps getting filled. The 10Y spread against the 7Y is now also in positive territory, and where the real yield for the former isn't far off positive territory. Markets are almost at full pricing for a 50-basis point rate hike, two weeks out of the Fed in their early May meeting. In central bank speak yesterday, Fed hawk Bullard spoke of wanting rates at 3.5% by the end of the year, about 1% above what markets are majority pricing from the Fed's December meet.

It was a mixed session in terms of sector performance, energy and financials on top while health and consumer staples suffered. Tech enjoyed small gains with consumer discretionary while communication fell slightly. The majority of the Dow’s components finished the session in the red with Disney and Honeywell at the bottom. Financials enjoyed a decent session with non-component Bank of America beating earnings estimates, and component Goldman Sachs topping the chart for this index.

The financial heavyweights are out of the way, key indices have a larger weighting for the sector, and while there are regional banks on offer this week, in earnings amongst its components both Johnson & Johnson and IBM are up next.

In economic data, there’s more housing data on offer after yesterday's NAHB (National Association of Home Builders) survey of homebuilders dropped to a seven-month low of 77 (though still well above 50).

Dow Technical (daily time frame) analysis, overview, strategies, and levels

IG client* and CoT** sentiment for the Dow

In sentiment, we’ve got ourselves a shift in retail trader bias from slight sell 53% at the start of the week to a majority buy 58%. They are majority buy the Dow, S&P 500, Nasdaq 100, and DAX 40 while extreme sell in the FTSE 100 and ASX 200.

CoT speculators are back in extreme short territory in the Dow according to last Friday’s release, with short positions up 1,998 lots and longs down 594. They are majority sell Dow and Russell 2000, while majority buy S&P 500 and Nasdaq 100.

Dow daily 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.