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The Dow 30 does not gather the respect versus the broader indices. Some of the criticisms include:

• The DJIA tracks only 30 large companies, while the S&P 500 includes 500, leading critics to argue that the DJIA neglects companies of various sizes and doesn’t accurately represent the economy.
• Being price-weighted, the DJIA gives more weight to companies with higher stock prices rather than larger market caps, which critics say misrepresents company performance.
• Additionally, the DJIA’s components are selected by a committee without formal rules, leading to irregular changes and no consideration of industry or sector impact on returns.

Nevertheless,, it remains perhaps the most quoted stock index standard when Mom and Pop watch the nightly news.

The Dow is currently trading at session highs up 743.4 or 1.85% at 40,954. The gain is the largest one day gain since June 2, 2023 when the index rose 2.12%.

The gainers are led by UnitedHealth who announced better-than-expected earnings today. The top 5 include:

• UnitedHealth (UNH): $547.25, +6.19%
• Caterpillar (CAT): $361.86, +4.65%
• Boeing (BA): $186.12, +3.91%
• Home Depot (HD): $368.84, +2.90%
• Dow (DOW): $54.68, +2.65%

The index is on pace for its 2nd record closing day in a row after closing above the May 17 high at 40003.60 yesterday. The index is also up for 5 consecutive days.

The S&P index is also on pace to close at a new record level. It currently trades up 33.12 points or 0.58% at 5663.80.

The NASDAQ index has been trading above and below unchanged but currently trades up 21 points or 0.12% at 18493. Unlike the S&P and the Dow it has not reached a new record level since last Wednesday when the index closed at 18647.45.

The biggest mover today however is the Russell 2000 which is up 75.75 points or 3.46% at 2262.77. Just three days ago the index rose by 3.57% as well. Since July 9, the index is up 11.49% as investors shift from the large-cap stocks to the small-cap stocks on hopes that the Trump/Vance ticket will better support small businesses, by lowering corporate taxes and having less regulation.

This article was written by Greg Michalowski at www.forexlive.com.

The price of Crude oil fell -$1.15 or -1.30% to $80.76. The decline is attributed to weak growth in China, the world’s No.1 oil importer, raising demand concerns.

The expectations that former Pres. Trump will win the November may also be a contributor as he is pro-drill and critical of the Biden administration regarded drilling and regulation on drilling.

China’s economy grew by 4.7% in Q2, the slowest pace in five quarters, due to a debt crisis in the real-estate sector, slowing consumer demand, and high youth unemployment.

The drop in oil prices persists despite rising hopes for a U.S. interest-rate cut (which can lead to higher demand and higher prices) after Federal Reserve Chair Jerome Powell expressed confidence that inflation is slowing towards the central bank’s 2% target rate.

Not so bearish for oil is technically, the price did break below the 100-day MA near $80.56 (see blue line in the chart below) but could not sustain downside momentum and is settling above the MA level.

In the new trading day, getting back below the level and also the natural support at $800 is needed to keep the sellers happy. Dip buyers, your hope is stay above $80.56 or more conservatively above $80.

This article was written by Greg Michalowski at www.forexlive.com.

There hasn’t been a better time to own the Russell 2000 since the year 2000. The five-day rally from 2029 to 2251 is a whopping 10.9% including 2.9% today.

This run is the best five-day run since April 2000, according to Tom Hearden.

That period in April/May 2000 was a counter-trend rally after the 1999/2000 tech bust and recession. The index later crashed in Aug/Sept 2001 as part of a violent history throughout that era that included 50% moves that later retraced and then sprung again. The influence of the Fed is certainly visible in some of these moves.

I don’t see many comparables between now and then as I see this era and the latest move as part of a breakout from a long period of consolidation. That said, the market is certainly sniffing out a Fed rate cut and some benefits from AI on margins (though here is a compelling argument against AI valuations).

This article was written by Adam Button at www.forexlive.com.

Bank of America observes that GBP/USD is starting to break its secular downtrend, which has been in place since 2008. Recent technical signals suggest a potential rally towards 1.40, contingent on a sustained break above key resistance levels and the 200-week SMA.

Key Points:

• Secular Downtrend: GBP/USD has been in a secular downtrend since 2008, attempting to break higher three times in the last 18 months but failing.
• Technical Resistance: Previous bearish bias was suggested while GBP/USD remained below resistances in the 1.2850-1.29 area, targeting declines to 1.2450 and potentially 1.21.
• Impulsive Move: An impulsive move through these resistance levels could signal the end of the secular decline and a rally toward 1.40.
• Current Breakout: As of the week ending July 12, GBP/USD is starting to break above resistance lines and the 200-week SMA at 1.2849, turning the outlook from pessimistic to optimistic.
• Confirmation Needed: A few weekly closes above the 200-week SMA would further confirm the trend change to an upward trajectory, supporting the (ABCDE) labeling as the end of a falling wedge pattern.
• Positioning Risk: A significant risk is the current positioning, with net long GBP futures divided by open interest at its highest level since 2011, indicating potential overextension.

Conclusion:

BofA notes a potential technical shift in GBP/USD as it starts to break its long-term downtrend. A sustained move above key resistance levels and the 200-week SMA could signal a rally towards 1.40. However, the high level of net long GBP futures poses a risk, suggesting caution in the face of potential overextension.

For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here

This article was written by Adam Button at www.forexlive.com.

SocGen examines historical patterns of the USD’s response to Fed easing cycles, noting that the chances of Fed easing in September have increased. With past easing cycles showing varied impacts on the USD, the overall trend suggests a lagged response rather than an immediate downturn.

Key Points:

• Historical Analysis: Since 1984, there have been 7 Fed tightening cycles and 6 easing cycles. SocGen analyzes the USD’s response during these periods.
• Key Easing Cycles:
  • 1984/86 Easing Cycle: The dollar peaked in February 1985, 175bp into the rate-cutting cycle.
  • 1989-94 Easing Cycle: The dollar peaked shortly after the first rate cut.
  • 1994/95 Tightening Cycle: Followed by rate cuts in 1995/96, the dollar continued to climb until 1998 before falling ahead of Fed easing due to the LTCM collapse.
  • 2000 Easing Cycle: The dollar fell by the time the Fed cut rates in December 2000, recovered to a new high in 2001, but trended lower in 2002.
  • 2004-06 Tightening Cycle: Followed by easing starting in 2007, by which time the dollar was already declining.
  • 2019 Easing Cycle: The dollar fell after the second and third rate cuts in late 2019, rallied in early 2020, spiked during COVID, and fell back after the Fed’s intervention.
• Median Outcome: Historically, the USD tends to experience a lagged reaction to Fed easing. Major falls occurred in 1985-87 and 2001-08, while smaller cycles had mixed impacts.

Conclusion:

SocGen’s analysis indicates that the USD’s response to Fed easing is often delayed rather than immediate. Historical trends show significant falls during extended easing cycles but mixed outcomes during shorter cycles. As the Fed contemplates easing in September, the historical context suggests that any impact on the USD might not be immediate, and the extent of the easing cycle will play a crucial role in determining the USD’s trajectory.

For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.

This article was written by Adam Button at www.forexlive.com.

France’s President macron accepts French governments resignation:

• Current government is to stay on in caretaker capacity until a new cabinet is formed.

Via the presidential office,

• Renaming Attal as caretaker prime minister
• Called on Republican forces (Not the RN or LFI) to work together to form a new government

Following the recent legislative elections in which no political bloc won an absolute majority, the caretaker government will manage current affairs without submitting new laws to parliament or making significant changes.

This period will ensure the smooth running of the Olympics, starting on July 26, and give political parties more time to form a governing coalition after the July 7 election runoff left the National Assembly without an overall majority.

The New Popular Front (NFP), a broad alliance of Socialists, Communists, Greens, and the hard-left France Unbowed (LFI), won the most seats, with 193 in the 577-member lower chamber.

Macron’s allies came second with 164 seats and the far-right National Rally (RN) third at 143.

This article was written by Greg Michalowski at www.forexlive.com.

New Zealand global daily trade price rises 0.4%. The average sell price comes in at $3,837/Tonne. The move higher comes after a sharp drop in the last report.

The NZDUSD is trading lower today, but is finding a stall on the first test of the 50% midpoint of the move up from the April low to the June high. That level some in at 0.60363. The low price today just reached 0.60355 (just below that level). The current price traders at 0.6044. A move below the 50% would increase the bearish bias.

On the topside the 100 day MA was broken earlier at 0.6063. A move back above that level and then the 200 day MA at 0.6077, would upset the sellers looking for more downside.

This article was written by Greg Michalowski at www.forexlive.com.

The US retail sales came out stronger than expectations with revisions to the prior month. The market likes that dynamic is a key Fed cut in play but everyone likes stronger growth too (as long as it is not inflationary).

The major US stock indices are advancing higher once again with the small-cap Russell 2000 leading the way again with a gain of over 1.30%. The shift continues for the small caps as a Trump/Vance ticket seems to be good for small companies (less regulation, focused on the rust belt).

A snapshot of the market 10 minutes into the open is showing:

• Dow Industrial Average average was 229.95 points or 0.57% at 40441.68
• S&P index up 20.74 points or 0.37% at 5651.95.
• NASDAQ up 86.16 points or 0.47% at 18558.73.

The small-cap Russell 2000 rose 29.45 points or 1.35% at 2216.47

Looking at US rates, the shorter end is higher and the longer and lower after the data:

• 2 year yield 4.463%, +1.0 basis points
• 5-year yield 4.121%, -1.1 basis points.
• 10 year yield 4.202%, -2.7 basis points
• 30-year yield 4.414%, -4.0 basis points

Crude oil is lower and trades at $80.51 or $-1.39. Technically, the price is trying to get, and stay below its 100-day MA at $80.56.

Bitcoin is trading at $63,900. It’s high-price extended up to $65,012 today (the highest level since June 20). Bitcoin’s 100-day moving average comes in at $64,502. Yesterday the price moved above it and closed above it. Today, the price could not extend above that MA level and stay above it.

This article was written by Greg Michalowski at www.forexlive.com.

The Bank of Canada meets on July 24 and economists are increasingly sure of a rate cut. That’s also reflected in interest rate derivatives which are now showing a 93% probability of a cut.

CPI decelerated to 2.7% from 2.9% with core numbers also slowing. The numbers show that the prior month’s upside surprise in inflation was just a blip in a broader trend of disinflation as demand in
the economy remains under pressure, according to CIBC.

They note that a big disinflationary tailwind is coming via housing and that rent slowed to +0.4% m/m and edged lower to 8.8% y/y.

“As population growth slows with the government restrictions tied to
NPRs, and more people move into the homeownership market as interest rates fall, rents should continue to
decelerate. Soon, the combination of fading MIC and a further gradual slowdown in rent will mean shelter will start to
add material downward pressure on inflation,” CIBC economists write.

“On the surface, the demand-driven part of inflation appears to fading with only a few idiosyncratic pockets keeping
inflation above target. In our view, the Bank of Canada can be comfortable gradually moving away from it’s meeting-
by-meeting and data-dependent strategy, and operate on something close to auto-pilot by trusting its forecasts which
have been much more accurate over the past year. The economy is clearly in need of interest rate relief to ensure a
soft landing with future headwinds such as large mortgage renewals and population growth that could cater. With
headline inflation back within the target zone and the BOS survey showing firm’s inflation expectations are edging
down, any worries of upside risks to inflation or inflation being stuck above target is missing the mark.”

This article was written by Adam Button at www.forexlive.com.

• Prior month 0.3%
• Business inventories 0.5% vs 0.3% expected
• Inventories ex autos 0.0% vs 0.2% prior period

This is rarely a market mover but it’s an important number in GDP calculations

This article was written by Greg Michalowski at www.forexlive.com.

• Prior was 43
• Current sales 47 vs 48 prior
• Six month sales 48 vs 47 prior

Lumber prices have been really struggling and that’s not a good sign for any pickup in building this year. A rate cut might start to help in 2025 but I don’t know if 1-2 cuts this year will do it.

This article was written by Adam Button at www.forexlive.com.

• 2024 global GDP unchanged from April at 3.2%
• 2025 boosted to 3.3% from 3.2%
• US GDP 2024 forecast cut to 2.6% from 2.7%, 2025 forecast unchanged at 1.9%
• China 2024 forecast raised to 5.0% from 4.6%
• China 2025 forecast raised to 4.5% from 4.1%
• Eurozone 2024 raised to +0.9% from +0.8%, 2025 unchanged at 1.5%
• Japan 2024 forecast lowered to +0.7% from +0.9%
• IMF says global disinflation momentum is slowing with higher inflation in services prices, brisk nominal wage growth
• IMF chief economist says China needs to restore household confidence, resolve property crisis to boost domestic consumption

This is what the report says about the US:

Growth is expected to slow to 1.9 percent
in 2025 as the labor market cools and
consumption moderates, with fiscal policy
starting to tighten gradually. By the end of 2025,
growth is projected to taper to potential, closing
the positive output gap….In the United States, after a sustained period of strong outperformance, a sharper-than-expected slowdown in growth reflected moderating consumption and a negative contribution from net trade”

The IMF is upbeat on Canadian growth next year and the UK economy should see a nice acceleration from a low level. Of course, I don’t think the market puts much stock into these forecasts.

This article was written by Adam Button at www.forexlive.com.