Dow Jones Industrial Average (.DJI) Leap to Records Following Powell’s Comments
U.S. stocks leapt Wednesday after Federal Reserve Chairman Jerome Powell set the stage for the central bank to cut interest rates to bolster flagging growth.
The Nasdaq Composite rose 0.75% to close at a record 8202.53. The S&P 500 touched a high during the trading session, briefly eclipsing the 3000 level for the first time before ending the day at 2993.07, 0.5% higher. The Dow Jones Industrial Average climbed 0.3% to 26860.20, snapping a three-day losing streak.
Investor sentiment turned slightly less bullish in the wake of the new intra-day index highs after the release of Federal Reserve minutes from its June meeting, which showed a Fed ready to act to support the U.S. economy.
“You don’t want too much bad news, where you think the economy is faltering,” said Joseph Saluzzi, co-head of equity trading at Themis Trading, in an interview with MarketWatch.
“You see the Fed minutes and think maybe things are a little bit worse,” he said. “Maybe people are getting a little nervous about corporate earnings.”
Still, stocks broadly rallied after the publication of Powell’s remarks before the House Financial Services Committed in which the Fed Chairman emphasized rising risks to the U.S. economy from trade policy and slowing global growth, as well as falling price inflation.
Powell noted that while the U.S. jobs market remains robust and consumer spending appears set to rebound, business investment has slowed considerably, along with housing investment and manufacturing output.
“Our baseline outlook is for economic growth to remain solid, labor markets to stay strong, and inflation to move back up over time to the Committee’s 2 percent objective,” Powell said in prepared remarks. “However, uncertainties about the outlook have increased in recent months. In particular, economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the U.S. economy.”
“A rate cut in July is now all but certain,” Aberdeen Standard Investments senior global economist, James McCann, wrote. “The strength of last week’s jobs number did lead some to think that the Fed may pause for thought. It’s clear from [Powell’s testimony] that they won’t.”
“There’s an element here of the Fed wanting to take pre-emptive action,” he added. “From an inflation perspective, the picture certainly seems sour enough to warrant a reaction. But from a growth perspective, there’s nothing in the data that suggests a rate cut is strictly necessary.”
Powell began taking questions from members House Financial Services Committee at 10 a.m. Eastern Time, after which stocks pared some of their gains. The move was likely a case of “buy the rumor, sell the news,” given that a July cut was “already being priced into the market,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management an interview with MarketWatch.
While Powell’s statement seemed to confirm that the Fed will cut interest rates in July, questions remain as to the magnitude of the cut, or plans for further reductions in interest rates during the remainder of the year.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 26,208.74.
The projected upper bound is: 27,457.48.
The projected lower bound is: 26,275.15.
The projected closing price is: 26,866.31.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 6 rising windows in the last 50 candles–this makes the current rising window even more bullish.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 53.4854. This is not an overbought or oversold reading. The last signal was a sell 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 64.98. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 3 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 111.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.
Rex Takasugi – TD Profile
DJ INDU AVERG closed up 76.709 at 26,860.199. Volume was 27% below average (neutral) and Bollinger Bands were 9% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 26,750.54 26,080.45 25,483.45
Volatility: 6 15 20
Volume: 250,785,856 274,720,064 320,539,808
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
DJ INDU AVERG gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
DJ INDU AVERG is currently 5.4% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of .DJI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .DJI and have had this outlook for the last 19 periods.