Dow and Nasdaq recover off the lows, but geopolitical risks remain in focus

Dow Technical analysis, overview, strategies, and levels

The mood - and hence risk appetite - remains relatively subdued with a big uncertainty hanging over the markets in the form of geopolitical tensions. That has meant the Dow gapped lower, but with a lack of retaliation on the geopolitical front thus far aiding it in finishing higher, keeping its bull trend technical overview intact. Sector performance saw communication stocks at the top followed by energy, and where materials, financials, and industrials were the only sectors in the red.

IG client and CoT sentiment for Dow

Extreme long traders in gold and oil according to the CoT (Commitment of Traders) report were big beneficiaries of the recent moves, while less so for indices' traders whose heavy long bias is down a notch in the Dow to 69%. As for retail traders holding a heavy short bias that’s risen to 74%, they continue to await a move back down to unwind short positions.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

As with the Dow, the Nasdaq suffered early intraday losses but managed to finish higher and not far off its recent record highs, keeping its daily bull trend technical overview intact even as investors await geopolitical updates and re-asses current risk parameters. Not all its components were in the green, but those that were included the tech giants, and with Netflix leading the gains.

IG client and CoT sentiment for Nasdaq

From a sentiment standpoint, retail traders had hoped for retracement back down to undo heavy short bias, with the net result an increase to 77% and near extreme short territories as recent price gains put the squeeze once more on shorts. On the CoT front, majority long bias has risen by 5% to 61% on an increase in long positions by 1,641 lots and a reduction in shorts by 790 lots.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

The DAX gapped lower yesterday and managed to undo significant losses earlier in the session, with the gap filled as of this morning. A brief glance at its chart shows consolidatory moves (even if at times volatile) that are in line with its current consolidatory technical overview whereby most of its indicators are neutral, and a negative DMI (Directional Movement Index) cross occurred yesterday. A lack of winners yesterday meant most of its components were in the red, but should risk appetite improve (as difficult as that may be in the current climate) and the German index might have a slight leg to stand on. The next item will be tomorrow's German factory orders following services PMI (Purchasing Managers Index) yesterday that expanded at a better than expected pace.

IG client and CoT sentiment for DAX

DAX chart with retail and institutional sentiment