US indices extended modest gains on Monday as the banking sector kick started earnings season this week with the release of better than expected earnings out of Citigroup. With the focus being on banks, corporate earnings will hold a strong influence on sentiment as it provides insight on the US economy’s outlook. While expectations for second quarter earnings are low due to a backdrop of slowing global growth and the prolonged US-China trade dispute, markets would still need to see positive updates in order to sustain the Dow’s advances. Separately on economic data, the NY manufacturing index provided support as it turned positive and climbed to 4.6. Today the US publishes retail sales and industrial production data which are likely to influence price action. Meanwhile, a slew of Fed members including Chairman Powell are scheduled to speak today and any fresh remarks on monetary policy would influence sentiment.
The Dow Jones opened higher on Monday as it took out the 27332 level to reach a new record high of 27388 before ending at 27359. Traders’ reaction to the high of 27388 will determine whether the bulls can push price any higher today. Failure to do so should leave the Dow in range mode with the lower bound at 27250. Look for the RSI reading to exit the overbought territory combined with a sustained move below 27250 to indicate short-term weakness and lead to a pullback where the 27000 level provides crucial support for the uptrend.
Support: 27250/ 27200