- Dow Jones futures are indicating a higher open for the index on Friday.
- DJIA futures closed higher on Thursday but volatility is rising.
- Dow Jones futures recover despite yields remaining elevated.
Dow Jones futures recovered ground on Thursday as the index rallied from heavy losses brought about by hawkish Fed comments. Of the main indices, the Dow lagged the S&P 500 while both the Dow Jones futures and the Nasdaq futures ended the day +0.25% ahead. However, the move was largely dragged higher by defensive sectors with Consumer Staples (XLP) +1.21% and Energy (XLE) +1.3%. Tech and financial sectors were underperformers on Thursday.
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Dow Jones Futures news: Fed hawks create anxiety
After the Fed minutes and comments from Fed members Brainard and Daly sent yields higher and equities tumbling, Thursday saw some form of recovery take hold. However, we had alarming comments from noted Fed hawk James Bullard, calling for US interest rates to hit 3% before year-end.
Bond markets remain highly nervous with the noted yield curve once again moving back into positive territory. The chart below is of MOVE which is the bond market equivalent of VIX. We can see just how volatile the bond market is as its searches for trend direction. With upcoming rate rises and the quantitative tightening, it is no wonder bond market participants are highly anxious. This will likely spill over into the equity market shortly.
MOVE chart, daily
Dow Jones Futures price prediction: Downtrend stays in place
Dow Jones futures remain in a clearly defined downtrend. We have posted three successive lower highs at 36,832, 35,752, and 35,281. The last level 35,281 is therefore our pivot. Below here, we remain bearish technically in the medium to long-term view. The first target, therefore, is a move to 32,167 which is low from the Ukraine invasion. For now, though we are likely to see more choppy trading. We are in a consolidation zone with a high volume. It is not until we break below 34,500 that volume gets lighter. The MACD is about to crossover but the RSI and MFI are both pretty neutral.
For Friday, 34,664 is the pivot point. On Thursday, this level produced an overbought signal from both the MFI and RSI. This signal proved correct and the Dow Jones futures lost 100 points for the remainder of the session.
Dow Jones futures chart, 15 minute
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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