Stock Indices: Dow Jones reaches one-week highs following hawkish Fed minutes

On Thursday Dow Jones Industrial Average traded within the range of 17,682.04-17,772.81. The benchmark closed at 17,732.82, ticking down 0.02% (4.34 points) on a daily basis. It has been the first drop in the past four trading days. The daily high has been the highest level since November 11th, when the blue-chip benchmark advanced as high as 17,807.18. In weekly terms, DJIA lost 3.71% of its value last week, which has been the first drop in the past seven weeks and also the sharpest one since the week ended on August 23rd. Back then the gauge registered a 5.82% slump. For the current month, however, Dow is up 0.39%.

Among the companies included in the benchmark, 12 posted a daily decline on Thursday and 18 posted a daily gain. Shares of UnitedHealth Group Incorporated (UNH) plummeted the most yesterday, going down 5.65% to close at USD 110.63. The daily rate of decrease has been the steepest one since October 3rd 2011, when UnitedHealth lost 6.94%. November 19th low of USD 109.61 per share has been the lowest price level since August 24th, when a low of USD 95.00 per share was registered, while the daily volume has been the highest since June 26th.

At the same time, the shares of Intel Corporation (INTC) registered the most notable daily increase within the DJIA, going up 3.44%, to close at USD 34.30, while marking the third consecutive trading day of gains. The daily gain rate has been the sharpest one since September 8th, when Intel added 3.44%. November 19th high of USD 34.73 per share has been the highest price level since October 26th, when a high of USD 34.96 per share was reached, while the daily volume has been the highest since October 14th.

On a weekly basis, 26 shares posted gains, while 4 posted a slump during the week ended on November 15th.

On Wednesday US indices received a boost, as the minutes from Federal Reserve’s policy meeting in October showed that a rate hike in December seems likely, in case unexpected shocks do not impact the economic outlook, incoming data continue indicating labor market improvement and annual consumer inflation returns to the target, which provides price stability over a medium term.

According to excerpts from the October minutes: “…almost all members agreed it was appropriate to wait for additional information to clarify whether the recent deceleration in the pace of progress in the labor market was transitory or reflected more persistent factors that might jeopardize further progress. They indicated that they would be assessing a range of labor market indicators over the period ahead to confirm further improvement in the labor market. Members, however, expressed a range of views regarding the extent of further progress in labor market indicators they would need to see to judge it appropriate to raise the target range for the federal funds rate in December.”

“…in determining whether it would be appropriate to raise the target range at its next meeting, it would assess both realized and expected progress toward its objectives of maximum employment and 2 percent inflation. Members emphasized that this change was intended to convey the sense that, while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting, provided that unanticipated shocks do not adversely affect the economic outlook and that incoming data support the expectation that labor market conditions will continue to improve and that inflation will return to the Committee’s 2 percent objective over the medium term.”

Correlation with other indices

Taking into consideration the daily closing levels of the major stock indices examined and the period November 9th-November 13th, we come to the following conclusions in regard to the strength of relationship:

DJIA to RTSI (0.9871, or very strong)
DJIA to FTSE 100 (0.9802, or very strong)
DJIA to S&P/TSX 60 (0.9575, or very strong)
DJIA to CAC 40 (0.9287, or very strong)
DJIA to Euro Stoxx 50 (0.9206, or very strong)
DJIA to DAX (0.8385, or very strong)
DJIA to KOSPI (0.7616, or strong)
DJIA to Nikkei 225 (0.5266, or strong)
DJIA to Hang Seng (0.2568, or weak)
DJIA to Bovespa (-0.2403, or weak)

During the past week, Dow Jones Industrial Average tended to have moved almost equally in one and the same direction with 6 major indices. This relationship has been the most pronounced between Dow and the Russian RTSI and the least pronounced between Dow and the German DAX.

Additionally, DJIA tended to have moved strongly in one and the same direction with the South Korean KOSPI and the Japanese Nikkei 225 during the week.

DJIA tended to have shown an insignificant correlation with Hong Kongs Hang Seng and the Brazilian Bovespa during the period in question.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the Friday pivot levels for DJIA are presented as follows:

R1 – 17,741.14
R2 – 17,749.46
R3 (range resistance) – 17,757.78
R4 (range breakout) – 17,782.74

S1 – 17,724.50
S2 – 17,716.18
S3 (range support) – 17,707.86
S4 (range breakout) – 17,682.90

By using the traditional method of calculation, the weekly pivot levels for DJIA are presented as follows:

Central Pivot Point – 17,461.64
R1 – 17,684.38
R2 – 18,123.53
R3 – 18,346.27

S1 – 17,022.49
S2 – 16,799.75
S3 – 16,360.60