The Dow Jones Industrial Average changed the main trend to down, according to the daily swing chart, earlier in the week, but momentum has shifted to the upside with the crossing of a key short-term retracement zone.
The main trend will change to up on a breakout over 51657.89. A move through 49909.07 will reaffirm the downtrend. The key area to watch is 50% to 61.8% of the range at 50781.48 to 50989.84. Trader reaction to this zone will set the tone into the close.
Right now, the market is trading on the strong side of this zone. If it continues to build strength over 50989.84, buyers could take a run at the record high at 51657.89.
If sellers come in late with enough power to cross to the bearish side of 50783.48 then look for a weak close with 50183.23 the first target, followed by the swing bottom at 49909.07 and the 50-day moving average at 49558.87.
SpaceX Changed the IPO Conversation
The $150 open against a $135 IPO price is a strong debut. The 26% gain by midday tells you institutional demand exceeded what the underwriters allocated. The weeks of chip selling that may have been driven by accounts raising cash for this allocation are now behind the market. That overhang is gone as of Friday morning.
Other private companies are watching that 26% first-day gain. If SpaceX opens the door to a wave of large filings, that pulls more capital out of existing positions over time. For Friday, the debut answered the one question that mattered. Institutional accounts showed up with real money at $150 a share, $15 above the IPO price, and kept buying.
Consumers Are Feeling Better
The University of Michigan consumer sentiment index rose to 48.9 in early June, beating the 46.0 expectation and marking a 9.2% increase from May. Gasoline prices have fallen roughly 40 cents per gallon over the past month according to AAA. Lower-income households showed some of the largest improvement in outlook.
One-year inflation expectations dropped to 4.6%, slightly below May. Five-year expectations eased to 3.4%. Consumers are not celebrating. But they are less pessimistic than they were a month ago and falling gasoline prices are the reason. If the Iran deal holds and crude oil stays near $84, that improvement has room to continue.
What to Watch
SpaceX priced at $135, opened at $150, and is running 26% higher by midday. The IPO overhang that pressured chip stocks for the past week is lifting. The Iran deal text is reportedly finalized with a potential signing in Switzerland on Sunday. West Texas Intermediate crude oil near $84 is taking inflation pressure off.
Consumer sentiment beat expectations on the back of lower gasoline prices. The Fed meets June 16-17 under new Chair Kevin Warsh. No rate change expected but the signal matters more than the decision.
The way I see it, the S&P 500 is sitting inside the 7429.38 to 7474.57 retracement zone. Above 7474.57, buyers take a run at the 7620.90 record high. Below 7429.38, the sellers step in and the 50-day moving average at 7247.78 becomes the target.
The Nasdaq-100 has resistance at 26085.30 to 26346.05. Above 26346.05 launches a move toward 27190.21. Below 26085.30 reopens the downside toward 25211.22.
The Dow is trading on the strong side of 50781.48 to 50989.84. Above 50989.84, the record high at 51657.89 is in play. Friday has the best combination of catalysts the market has seen all week. The close decides whether the week ends on strength or gives it back.
More Information in our Economic Calendar.