Dow and Nasdaq hit limit down as Senate vote fails

Dow Technical analysis, overview, strategies, and levels

The plummet last Monday was a boon for conformist technical overview traders whose sell on breakout offered plenty, but thereafter the market was relatively more rangebound hugging the lows (even if intraday moves were still volatile and aiding daily conformist breakout strategies). Most of its components were in the red led by Disney and 3M, while the few that were in the green included Travelers, Chevron and Merck. US sector performance showed nearly all in the red led by defensive utilities, while energy was in the green albeit slightly. In US data, it was mixed to the downside with manufacturing contracting, unemployment claims rising, but existing home sales posting a strong figure.

Expect the focus to shift towards fiscal policy, as the Dow hit limit down this morning following the US Senate’s failure to pass a stimulus package to deal with the effects of the coronavirus, a re-vote scheduled for later today.

IG client^* and CoT sentiment for Dow

In sentiment, retail bias has shifted to majority long as shorts got out on Monday, while institutional long bias has dropped to 72% on a larger reduction in longs (4,109 lots) than shorts (697 lots).

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

On both the daily and weekly, conformist breakout strategies offered plenty. But given last week's moves started to oscillate widely within a more rangebound territory, positioning opposite market movement after significant reversals did yield as well. The Nasdaq also ended the week in the red, but the extent of the damage was less severe than that of the Dow. In terms of its components, Marriott's share prices were the outperformers in the green, while at the bottom Fastenal and Regeneron Pharmaceuticals led the decline.

IG client^* and CoT sentiment for Nasdaq

In sentiment, retail bias here has also shifted from a majority short 54% at the start of the week to a majority long 62%. Larger speculative traders according to the latest CoT (Commitment of Traders) report are also majority long, the bias rising 3% to 60% as the reduction in consolidated shorts by 2,580 lots outdid the reduction in longs by 1,631 lots.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

With big ECB (European Central Bank) easing on the table after its Wednesday announcement, the hope was for the increase in asset purchases to offer more liquidity to the financial markets, and indirectly (or even directly) put some sort of a floor on European equities. Put a floor it did albeit temporarily, as although the DAX's price broke through last week’s Weekly 1^st Support levels on more than one occasion, it didn’t offer as much follow through and here was the rare case where contrarian reversals (after significant reversal) managed to outperform on some occasions. IFO’s preliminary data didn’t help, and we’ll get more business and consumer sentiment figures this week as the country bans gatherings of more than two.

IG client^* and CoT sentiment for DAX

In sentiment, retail long bias is little changed for the week, but reached a heavy long 71% on Thursday before range-trading longs got out on Friday on the partial retracement.

DAX chart with retail and institutional sentiment

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am.

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