Early trade on Wall Street has been a rough affair, with the DJIA DOW (-31), S&P 500 SPX (-4), and NASDAQ (-19) in the red for the first half-hour of trade. The Philadelphia FED Manufacturing Survey for July (also known as the Philly FED Survey) smashed expectations during the pre-market hours. Thus far traders have ignored the good news, choosing to limit risk going into late-week trade.

During the pre-Wall Street open, the Philly FED Survey (July) was released to the public. The number came in at 21.8, crushing consensus projections (5.0) and the previous release (0.3). This is an extremely strong figure and suggests that the U.S. manufacturing sector is breaking out of its relative slumber.

DJIA Falls Following Strong Philly FED

Today’s early action on Wall Street has been bearish, with the DJIA in danger of posting a third-straight losing session. Subsequently, September E-mini DOW futures are challenging downside support.

Overview: In a Live Market Update from Wednesday, I issued a buy recommendation in the September E-mini DOW. Once again, going long on a dip proved profitable, with the trade hitting the 40 pip profit target. Now, the key level for September DOW futures is the 38% Current Wave Retracement at 27114. If this level holds as support, maintaining a bullish bias is a good idea.

Equities are off this morning in part because of the strong Philly FED Survey. In reality, it casts doubt on how long the FED will hold a dovish stance toward policy. This has many traders reevaluating their perspective regarding the FED being receptive to quantitative easing.

At this point, a 100% chance of a rate cut ― either ¼ or ½ ― is being assigned to the July 31 FOMC meeting by the CME FEDWatch Index. After July 31, the picture becomes much hazier. It stands to reason that strong figures such as today’s Philly FED Survey don’t bring much clarity to the situation.