Dow and Nasdaq plummet despite 0.5% Fed rate cut

Dow Technical analysis, overview, strategies, and levels

After surging on Tuesday, it was a question of whether the Dow could register another green session especially with expectations of further monetary and fiscal easing to aid the economy in the current tested economic climate. Despite the US Federal Reserve’s (Fed) surprise 0.5% rate cut, the net result was a finish lower. Only Coca-Cola finished in the green, the rest in the red with American Express at the bottom. That meant overall US sector performance showed all sectors closing in the red, tech leading the losses followed by financials and communications. Data yesterday was light, but this evening we've got services PMIs (Purchasing Managers Index) for both Markit and ISM (Institute for Supply Management), as well as ADP's (Automatic Data Processing) non-farm estimate ahead of this Friday's official figures.

IG client^* and CoT sentiment for Dow

In sentiment, retail bias has shifted back to majority long, standing at 58%.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

Risk-related flows despite a Fed rate cut meant that both Dow and Nasdaq were in for a similar red session, though the Nasdaq was the relative underperformer as tech stocks suffered significantly. Amongst its components there were a few outperformers including eBay and Tesla, with nearly the rest in the red with Marriott at the very bottom down 7%. While it’s possible the market may start to find a range to settle into, the overview remains volatile, its price crossing back below its 100-day moving average yesterday.

IG client^* and CoT sentiment for Nasdaq

Retail bias here has also shifted from majority short, and currently at a slight majority long 53% as of this morning.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

Compared to US indices' Dow and Nasdaq, the German DAX's price drop was relatively limiting, as it enjoyed a smaller recovery when the Dow and Nasdaq partially recovered earlier in the week. As for its components, most were in the green before the close but suffering more so this morning. German services PMI will be released today, though in the context of the current risk-related atmosphere it will likely be of little impact unless the figure veers significantly off its expectations.

IG client^* and CoT sentiment for DAX

In sentiment, the lack of retracement back up has meant that retail bias remains in heavy long territory, with the plummet taking that bias up a notch to a majority buy 66%.

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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