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Slight short profit-taking as equities finish in the red

Equities finish lower as risk appetite set to change on tonight’s Fed minutes and Friday’s Powell talk.

DOW: Equities slightly in the red ahead of tonight’s Fed minutes

Better than expected earnings results from Home Depot powered its share price higher, outperforming compared to the rest that mostly lagged, with the end result a lower finish for the Dow that has shown conflicting technical signals with a bear trend technical overview that’s barely intact as indicators turn more neutral (if not positive). Focus is back to fundamentals however with the Fed’s minutes this evening, and rate cut expectations will be in focus after what has already been a reduction in the likelihood of further rate cuts this year. Little change in retail bias on slight short profit-taking, dropping 3% to a majority short 59%.

NASDAQ: Suffering a similar fate as the Dow but intraday movement relatively rangebound

Both Dow and Nasdaq will be a similar boat this evening upon the release of the Fed’s minutes, and likely at the mercy of rate cut likelihoods that have been a driving force for flows into equities on anticipation of further Fed easing. While the White House wants further easing, tonight’s minutes and the attitude amongst board members will offer insight into how likely that may be, with Fed Fund Futures nearly fully pricing in a rate cut for September. Technicals will mean less this evening, and as a result contrarian breakout strategies (in either direction) may be more ideal for limited profit-taking followed by reversal strategies, and fading ought to be avoided entirely.

DAX: Back below its 200-day moving average

In terms of data, German PPI was a notch above expectations with tomorrow’s preliminary PMI figures crucial. In the meantime, however, the real driving force will be whether (and how soon) fiscal stimulus may be applied by the German government to avoid what could be a recession if next quarter’s GDP figures post another contraction. ECB stimulus will also matter, and while tonight’s Fed minutes effects US equities more so than European ones, it could be effected if a risk-off/on scenario were in play. Retail bias has risen slightly to a majority long 55%, but as always with range-trading a common theme for this index it could easily shift to majority short should a significant price drop occur.

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