Dow, Nasdaq and DAX recover off of this morning’s gap lower

Dow Technical analysis, overview, strategies, and levels

The Dow finished little changed from where it started last week, crossing but failing to close above its 50 and 100-week moving averages and aiding contrarian reversal strategies later in the week as it retraced back down. On Friday, all US sectors finished in the red save for health care, the losses heaviest for defensive utilities. That meant most of its components finished in the red with Disney, Raytheon and Boeing taking heavy losses, while Walgreens, Merck, and Walmart were of the few that finished higher. Stories like that of Apple closing some stores in some US states due to a rise in coronavirus cases certainly dents sentiment, and the next main item will be tomorrow's manufacturing and services data out of the US.

IG client^* and CoT sentiment for Dow

Retail bias is still in slight majority short territory, while CoT (Commitment of Traders) speculators have upped their heavy short bias to near extreme territory on a reduction in longs by 1,708 lots and a rise in shorts by 5,574 lots.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

With the health care sector the exception finishing higher, the outperformers on Friday were health companies' BioMarin, Incyte, Regeneron, Walgreens, Vertex, Cerner, Gilead, and Biogen. But while they took gains, there were plenty in the red that prevented the Nasdaq from holding onto gains later in the week. The buy breakout on the Weekly offered plenty before stalling at the highs, while the breach of last Thursday's key pivot point offered far less and aided contrarian sell strategies instead on what has been a lack of follow through when the tech-heavy index edges higher.

IG client^* and CoT sentiment for Nasdaq

A lack of a significant price drop here means retail bias was and still is higher than that of the Dow, rising to a heavy short 68% where the bulk of those shorts were initiated at lower price levels. For CoT speculators, they are holding a majority long bias unlike in the Dow and S&P where it's majority short, raising longs by 1,175 lots and reducing shorts by 1,831 lots.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

The German DAX didn't live up to volatility later in the week following last Monday's wild moves, and the buy-on-reversal conformist strategy outperformed on Thursday before a break on Friday to take its price for a close beneath its 200-day moving average. On the weekly chart, its main long-term moving averages are closely huddled to each other, making for plenty of false signals and easily causing technical overview shifts. Amongst its components, Wirecard took all the attention after auditors couldn't account for $2.1bn in cash on its balance sheet, its stock plunging 80% making it easily the worst performing component on Thursday and Friday. Outperformers included SAP and health care company Fresenius.

IG client^* and CoT sentiment for DAX

In sentiment, range-trading is usually heaviest here, and the start of last week's 50/50 bias moved to a majority short 61% mid-week before fresh shorts closed out to end the week 56% short.

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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