Trading the Dow 30 after the disappointing Non-Farm Payrolls
Technical overview shifts in the key index following the pullback late last week made worse by a deteriorating labor market, while CoT speculators shift to net sell for the first time in months.
US equity index futures are up but nowhere near undoing last week’s losses for the S&P 500 (w/w -2.5% to 6,238), Nasdaq 100 (-2.5% to 22,763) and more so the Dow 30 (w/w -3% to 43,588). It might have started off with a hawkish hold out of the FOMC (Federal Open Market Committee) last Wednesday, but the focus shifted quickly to Friday’s Non-Farm Payrolls (NFP) out of the Bureau of Labor Statistics (BLS) where the results didn’t just disappoint but raised feared of a deteriorating labor market.
NFP growth for the month of July was 73K and notably lower than roughly 110K expectations, but the real worry were the downward revisions in previous figures: June from 147K to just 14K and a similar story for May at 19K from 125K. The other figures didn’t offer much hope with the unemployment rate rising to 4.2% derived from the household survey which showed a decline 260K, a labor force participation rate at its lowest since 2022 with a 62.2% print, and wage growth m/m (month-on-month) 0.3% as expected but y/y a notch higher to 3.9%. US President Trump fired BLS Commissioner McEntarfer following the NFP release.
Other economic data didn’t impress with ISM’s (Institute for Supply Management) manufacturing PMI for the same month remaining in contraction territory worsening to 48 from 49.5, its pricing component dropping from 69.7 to 64.8 but still very high keeping the stagflationary narrative within the manufacturing sector visible, new orders improving but still contracting at 47.1, and employment worsening to 43.4. UoM’s (University of Michigan) revised figure for consumer sentiment was 61.7 slightly below forecast, and it was mixed when it came to consumer inflation expectations (one-year figure rising a notch to 4.5% while for the five-year it dropped from 3.6% to 3.4%).
Risk appetite was in for clear retreat, though on the positive side market pricing (CME’s FedWatch) raised likelihoods of a Federal Reserve (Fed) rate cut in September significantly (to about 80/20 in favor), via majority sees another in October (60/40), and a coin toss on a third one in December. Staying with the Fed, Kugler resigning opens the door to a Trump pick that is in favor of lowering rates and we got statements from both Bowman (who voted for a rate cut) who has "even greater confidence that tariffs will not present a persistent shock to inflation" and Waller (who was the other member who voted for a reduction) seeing that the cautious approach “does not properly balance the risks to the outlook and could lead to policy falling behind the curve”. The Fed’s Bostic said following the weaker labor data that they’ll need to figure out “to what extent is this slowdown likely to persist and get us into a more troublesome position”.
Week ahead: Services PMIs, Treasury auctions, and more earnings
As for the week ahead, it’s relatively light today with factory orders for the month of June and the Fed’s Loan Officer Survey for the second quarter. It picks up tomorrow with services PMIs (Purchasing Managers’ Index) that ought to stay in expansionary territory else risk further fears of a slowdown in growth. There’s the weekly mortgage applications on Wednesday followed by the 10-year auction and a couple FOMC members speaking, the weekly claims on Thursday and the 30-year auction, and relatively light on Friday. On the earnings front, there’s AMD, Super Micro, Disney, McDonald’s, Uber, Eli Lilly, and more.
Dow 30’s technical overview, strategies and levels
The technical overview on the daily time frame has shifted from what was ‘bull average’ to ‘consolidation – volatile’ net favoring breakout moves for conformists while contrarians who believe price action to be more contained following key fundamental events last week have reversal strategies to contend with.
Price is below all its main short-term moving averages (MA) but above all its main long-term ones, at the lower end of what have been narrow Bollinger Bands, on the DMI (Directional Movement Index) a recent negative cross with the -DI getting above the +DI but requiring a larger margin between the two, and an ADX (Average Directional Movement Index) still in trending territory. Its RSI (Relative Strength Index) hasn’t reached oversold conditions, still quite a ways from the level.
Zooming out to the weekly time frame and it’s still ‘bull average’, with price briefly breaking beneath its longer-term bull channel but enjoying a couple other key indicators that are still bullish, though keep in mind a negative DMI cross has occurred there as well.
Capital.com’s client sentiment for Dow 30
The real shift hasn’t really been on the technical front just yet even after the fundamental moves, rather in sentiment as CoT (Commitment of Traders) speculators have shifted from net long 52% to a net short 55% on a reduction in long positions (by 1,936 lots) and a simultaneous increase in shorts (by 2,200), ending months of net buy sentiment among them. The latest pullback in price occurred after the positioning was taken and as a result, we may see a larger net sell bias in the upcoming report as some long momentum traders get spooked into exiting.
Looking at the other sentiment circle and Capital.com clients are majority buy and rising, reaching a heavier 73% following the latest pullback in price and much higher than the moderate 58% buy bias at the start of last week.
Client sentiment mapped on the daily chart
Source: Capital.com
Period: JUNE 2025 – AUGUST 2025
Past performance is not an indicator of future results.
Dow 30’s chart on Capital.com platform with key technical indicators
Source: Capital.com
Period: MAY 2025 – AUGUST 2025
Past performance is not an indicator of future results.
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