US indices traded mostly higher on Thursday with the Dow escaping a potential loss on the day with the help of monetary policy updates. Fed member John Williams urged for “preventative measures” against a moderating domestic economy in a speech which markets interpreted as a rate cut signal at the FOMC meeting on July 31. Once again the prospect of looser monetary policy proved to be a market mover and the leading fundamental theme as it drove the Dow index out of its intraday low. Meanwhile, economic data on the day didn’t support expectations of a rate cut as the Phil Fed Manufacturing index unexpectedly climbed to a high of 21.8 in July versus an estimate of 5. Today, the US publishes Michigan consumer sentiment which is expected to show an improvement. On the geopolitical front, The US shot down an Iranian drone which could add to the negative global sentiment stemming from a stall in US-China trade talks. Combine this with the lackluster earnings reports so far, upside support for US equities should be limited without rate-cut induced moves.
The Dow reached an intra-day low of 27050 before bouncing back up to end 3 points higher at 27222. The pullback didn’t last long as Dow futures are pointing higher this morning and attempting to trade through resistance at 27333 to target the record high of 27388. Failure to surpass 27333 should lead the Dow lower with a sustained move below 27220 required to target the support at 27100. If this level fails, then look for a re-test of yesterday’s low at 27050.
Support: 27220/ 27100
Resistance: 27330/ 27388