Dow still on track after data

The payrolls outcome doesn't stand in the way of fresh highs

The payrolls outcome doesn't stand in the way of fresh highs

As often the case, markets coalesced around inflection points ahead of Friday’s major risk event, U.S. monthly employment data. The typical interpretation is that sentiment had reached a pivotal level beyond which fundamental confirmation was required to venture.

With data strong in places and weak in others (payrolls at 196,000 vs. 180,000 expected; March earnings growth soft) reaction was muted. Nevertheless, with February’s weak headline revised only slightly higher, from a market view, risk considerations barely changed. The data largely vindicate the Federal Reserve’s “patient” stance. Elsewhere, news emanating from U.S.-Sino trade talks remains promising, if uncertain.

The main challenge for stock markets then, after many reached new highs for the year this week, is whether sufficient impetus remains to extend gains in the near term. The watch is similar for Dow futures, which set a top of 26966 in October. The weekly chart illuminates the likelihood of significant support now that price has passed heavyweight challenges:

  • 61.8% and 78.6% retracements of the October to end-December fall
  • 26268 resistance from an unmistakeable long-legged ‘indecision’ doji on 8th November
  • 25246-25251 double bottom

To be clear, whilst the Dow’s uptrend is not in question, it is technically weakened by persistent lack of precision. Overbought readings from momentum oscillators also aren’t playing ball.

CBT Dow future (continuous) – weekly [05/04/2019 16:10:31]

Source: Tradingview/City Index

That said, the channel forming since late March is increasingly validated in close-up. Even though it may not last, a reasonably early warning that the current rising leg is in doubt is likely. A sustained break below the lower rising line and neutralisation of 26282 would be required for alarm bells about the upside to sound.

CBT Dow future (continuous) – hourly [05/04/2019 16:31:17]

Source: Tradingview/City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.