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The Dow Jones Industrial Average traded sideways on Thursday, closing near opening price at 18,352.05. The index shrugged off positive sentiment from BOE’s aggressive monetary easing as investors were taking cautious steps ahead of the nonfarm payrolls report..
Only a half of the Dow’s 30 companies recorded gains on Thursday. Credit card provider Visa Inc. and Chipmaker Intel Corp were the best performers, rallying 1%. Software giant Microsoft Corp and fast-food retailer McDonald’s Corp were the runner-ups. These two blue-chips closed up 0.7%. Meanwhile, Walt Disney Co (NYSE: DIS) witnessed the biggest loss on Thursday, falling 1%. Others positions on the red side belonged to discretionary retailer Home Depot Inc. and Boeing Co, whose shares finished down 0.7% and 0.5%, respectively. Despite another solid rally in oil prices yesterday, the energy sector declined 0.2%
Futures for the Dow Jones Industrial Average rose only 0.13%. Traders have been taking risk off the table ahead of the closely watched nonfarm payrolls report for July. The Labor Department is expected to announce the creation of 180,000 jobs in July with unemployment retreating 0.1% from the 4.9% in June while Average Hourly Earnings are expected to accelerate by 0.2%. Today’s NFP will provide the Fed with important indicators for the U.S labor market and contribute to considerations on the next rate hike.
However, against the background of accommodative monetary policy from major central banks and the uncertainty of the U.S Presidential Election in November, traders are currently pricing in only a 9% chance of a rate hike in September and 32.1% in December, according to the CME Fed Watch tool.
In a separate report, the Commerce Department will release the national trade balance for June which is forecast to come in at -$43.1 billion. The US trade deficit is forecast to widen from the $41.14 billion in the previous month.
Fig: DOW JONES D1 Technical Chart
The index is taking small steps and trading with thin volumes as many traders have stepped aside, holding their breath before the widely watched news. On the daily chart, the bull is still dominating the market as RSI (14) is still above 50, while the distance between the 2 MAs is still widening. We expect the index to test the highs at 18626.32 soon
Buy Stop at 18420.00, take profit at 18600.00, Stop loss at 18355.00