The U.S. 30 (underlying Dow Jones Industrial Average) halted seven-day advance as economic data showing a rebound in consumer spending offset a wider selloff in commodities. On Tuesday the index dipped 47.3 points or 0.22 percent from the record high with a sign that a high resistance found at historical highest level of 21168.7.
U.S. equities were lower at the close on Tuesday, propelled by losses in the Oil & Gas, Financials and Basic Materials sectors. The biggest gainers of the session on the U.S. 30 were Verizon Communications Inc (NYSE: VZ), which jumped 0.88 points or 1.94 percent closing at 46.20, and SM Company (NYSE: MMM) rose 1.77 points or 0.88 percent to 202.44 in late trade. While companies which suffered biggest loss in stock value included Goldman Sachs Group Inc (NYSE: GS), which sank 4.36 or 1.96 percent to close at 218.42, and JPMorgan Chase & Co (NYSE: JPM) declined 1.46 points or 1.71 percent to end at 83.90.
According to recent data released in U.S., the consumer spending recorded its biggest increase in four months in April and monthly inflation rebound, pointing to a robust domestic demand that could propel another interest rates hike next month.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, is set to 0.4 percent growth last month after an upwardly revised 0.3 percent gain in March as households spent more on both goods and services. It is likely to remain on solid ground in the wake of other reports on Wednesday that showed consumer confidence among households still at lofty levels despite some slippage this month.
The personal consumption expenditure (PCE) price index excluding food and energy rebounded 0.2 percent after dipping 0.1 percent in March, matching market consensus. But the so-called core PCE price index gained 1.5 percent in the 12 months through April, the smallest increase since December 2015.
Going into later this week, traders are looking forward to some key U.S. data to help provide further direction for the U.S. 30 index. Key high importance events for this week includes U.S. ISM Manufacturing (May), change in Non-farm Payrolls (May) and unemployment rate (May).
Technically the U.S. 30 index is consolidating in a narrow price channel, as depicted below. In the event that the index breaks higher, traders should first watch for the breakout of the March 1’s high of 21168.7. Alternatively if the index failed to test the upper channel line, it more likely retreat to find supports near the 20-day moving average.
Chart 1: U.S. 30 Daily
Sentiment totals for the Dow Jones Industrial Average (DJIA) are currently in the area dominated by net-short traders. From the past incidences of such one-sided positioning it seems clear they precede key turning points: the Dow Jones reversed lower through early March when sentiment hit over 80% short (below 20% long). Now sentiment remained at least 80% short for over a month as both indices continued onto fresh record highs.
Chart 2: Wall Street Client Sentiment
