DAX plummet aids extreme short retail bias
Dow and Nasdaq continue to oscillate close to the highs while the DAX gets hit on worsening German and Eurozone data.
DOW: Dropping at the start but finishing higher for the session
Indices plummeted early on yesterday following worse than expected global Purchasing Managers’ Index (PMI) data and US-China trade talks that haven't led anywhere, though it was European indices that bore the brunt of the fall given the effect of the Eurozone data on the bloc. As it stands, the index’s value isn’t that far off from its mid-term resistance level, but there’s no denying its bull trend technical overview has been stalling. Retail bias has inched higher and closer to extreme short levels as range-trading continues to entice more shorts while longs close out with limited gains and stands in significant contrast to institutional bias of an extreme long88%.
NASDAQ: Relatively range-bound movement with its price not far off from the highs
Positive technical bias still remains in this index with its price just above its 50-day moving average, its Directional Movement Index (DMI) positive, and its Average Directional Index (ADX) showing an ongoing propensity to trend. However, stalling at these levels and remaining relatively range-bound with global data worsening is making it more difficult for indices to make another push higher, even if the US Federal Reserve reduced rates last week by 0.25%. Retail sentiment is also heavy short here at 65%, though less than the Dow due to underperformance in the tech index.
DAX: Time to start pricing in a German recession and the potential European Central Bank (ECB) reaction
It was a serious miss for Germany's manufacturing PMI figures, and with preliminary manufacturing and services PMI figures worse off for the Eurozone overall as well as for its core. That meant European indices suffered significant drops early in the session, even if they recovered somewhat by the end of the day. Retail traders were holding extreme short bias in this index at 78% on range-trading at the highs, and the drop back down certainly aided them as they were enticed into taking profit and pushing majority short sentiment 5% lower to 73%, and keeping its mid-term resistance level holding as its bull trend technical overview stalls. It’s likely that given the dismal German data, Q3 Gross Domestic Product (GDP) figures will likely show contraction, and officially put the manufacturing powerhouse in a recession.
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