Dow 30 Trade: Lighter impact in the futures market as tech plummets

Losses for US equity indices as DeepSeek hits tech valuations

US equity index futures are in retreat where it’s most notable for the tech-heavy Nasdaq down 2.6% to 21,200 over fears of China’s cost-effective DeepSeek AI model threatening Big Tech’s dominance in the sphere. There’s no denying the weighting of tech, communication and consumer discretionary on the S&P 500 (over 50%) as it falls 1.5% in the futures market, but the Dow 30 seems to be the lucky one this morning down only 0.8% thanks to smaller tech exposure.

Tariff talk vs action, Stargate vs Texas Instruments, and mixed US data

The losses this morning have erased last week’s gains in the Nasdaq 100 and not far off doing so in the S&P 500, as momentum built on the Stargate announcement was dented by guidance from Texas Instruments before the DeepSeek news, lighter tariff talk seen as a positive before a brief showdown on the trade front between the US and Columbia, and mixed US data. Preliminary PMIs (S&P Global) showed manufacturing emerge from contraction with a 50.1 print though services disappointed even if still expansionary at 52.8. For the housing sector, existing home sales in December rose 2.2% to 4.24m above forecasts, while for consumers UoM’s revised figures for consumer sentiment dipped to 71.1 with inflation expectations holding on the 12-month reading while a notch lower to 3.2% for the five-year figure.

Light today in a week full of impacting items

It’s relatively light today with US new home sales as well as bill and note auctions. But don’t let the light start fool you as it’ll pick up notably with plenty of earnings including most of Big Tech with Microsoft, Meta and Tesla on Wednesday, and Apple on Thursday. There’s also the expected FOMC (Federal Open Market Committee) hold on rates this Wednesday. In terms of economic data, advance GDP (Gross Domestic Product) on Thursday and PCE (Personal Consumption Expenditures) price index on Friday.

Dow Technical analysis, overview, strategies, and levels

Most of the key technical indicators on the daily time frame are flashing green with price as of the close above its main moving averages (MA) even if peeling off the upper end of the band, a wide gap for the +DI over the -DI on the DMI (Directional Movement Index) front to label it as ‘positive’, an ADX (Average Directional Movement Index) well in trending territory, and an RSI (Relative Strength Index) coming off oversold territory. There’s no denying the positive technical bias that comes with it for its technical overview, but the issue was and still is the matter of price-indicator proximity that can tilt the technical indicators with relative ease, and means while conformist buys off the 1^st Support might do so via fade, those looking for added caution with the major fundamental items on offer can tweak it to manage a reversal or a significant one (which off lower levels would be in line with weekly conformist buy strategies).

As for the weekly time frame, it remains ‘bull average’ with price above all its main moving averages and still working within a wide bull channel after breaking beneath it roughly a couple weeks back, with an ADX not in trending territory, and the +DI over the -DI but not by a large margin after a positive cross occurred recently. We aren’t near the weekly 1^st Support just yet given it’s only the start of the week (even when factoring the early drop), but should it get there prior to key fundamental events means added caution for conformists buying off the level ideally waiting for a significant reversal strategy first, with contrarians at the ready with sell-breakouts should the recent rout expand beyond tech for whatever reason.

IG client* and CoT** sentiment for the Dow

IG clients have opted to remain only just in heavy sell territory at 65% and are little changed since Friday, no doubt beneficiaries of the pullback in the futures market that will likely entice shorts into closing out and longs at key levels into initiating.

CoT speculators were and still are net long moving out of slight buy territory to 55% on a reduction in shorts (by 2,183 lots) that was larger than the cut in longs (by 1,302). They’ve also upped their net buy bias in the Nasdaq (from 54% to 58%) while moving further net short in the S&P (from sell 53% to 56%) and shifting in the Russell (from the middle to short 59%).

Dow 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 the start of this week for the outer circle. Inner circle is from the start of last week.
**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.