Chairman Powell Says US Expansion is 'Sustainable'

The FED's Chairman Jerome Powell said on Tuesday that he is open to new rate cuts to face the economic risks. Also, said the Fed would act "as appropriate" amid an economy that will continue to expand.

Chairman Powell said at a conference in Denver that "clearly, things are slowing down a bit." However, it is normal for long expansions to have periods of deceleration.

The two interest rate cuts made during this year have helped maintain a "favorable" outlook for employment and inflation. Finally, Powell added that the U.S. economy could be recovering, and there is no reason why it cannot continue in the expansion cycle.

Technical overview

The Dow Jones, in its weekly chart, continues showing the progress of a potential expanding triangle. The long-term structure could have completed the wave ((D)) in black label. However, still, we have signals of the bullish structure in progress.

If the price action drives DJIA  to break and close under the 25,400 pts, we will have fresh lows, and wave ((E)) will be active. In the first instance, we foresee a new low into the area of 21,500 pts.

Dow Jones Industrial Average, in its 8-hour chart, presents an Elliott flat pattern that could be completed. The bearish sequence began on September 12 at 27,312 pts and ended on October 03 at 25,744 pts.

The bounce developed by DJIA in early October makes us expect a marginal upside to the area of 27,200 pts. The invalidation level for the bounce scenario is at 25,395 pts.

On the other hand, from the latest CFTC report, institutional traders continue holding a bullish bias for Dow Jones futures (CBOT:YM).

During the past week, institutional traders increased their long positions by 0,07% (WoW) while they raised the short trades by 6.06% (WoW).

In terms of percentage of trades, institutional traders hold an 86,93% of long positions, and 13.07% of shorts positions.  Buying trades carry slightly below the 13-weeks average that remains at 87.06%. Also, it is below the highest level (91.83%) of long trades reported on August 22, 2017.

In conclusion, the Dow Jones short-term structure has a topping formation. However, from the last Commitment of Traders report released, institutional traders still are on the bull side. This bias makes us expect a bullish move for the short-term. It is likely that price action drive to DJIA to 27,200 pts.

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