Dow’s big drop keeps short-term technicals in the red

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It was a noteworthy when the Dow dropped in one session, taking it closer to a short-term support level. All the Dow 30’s components finished the session in the red with Verizon and Amgen suffering limited losses with heavier losses for Walgreens, Coca-Cola, and Walmart. In the after-hours Cisco's share price dropped 17% following its earnings, missing revenue and forecasting a decline.

The focus overall remained on the retail sector with non-component Target (following component Walmart’s results on Wednesday) taking the sector lower. That meant consumer staples and discretionary were hit hardest, all were in the red with both tech and communication suffering significantly.

But it wasn’t the only item noted by investors and traders with downgrades in the GDP for the US and China from a couple Wall Street banks as global inflationary data is still hot. As for US economic data, it was largely about housing, with building permits and housing starts dropping from the previous month and the latter a clear miss. Weekly mortgage application data showed an 11% drop.

Dow Technical analysis, overview, strategies, and levels

From a technical standpoint, it hasn’t changed from what is a stalling bear trend technical overview. Yesterday’s session gave conformist plenty of sell-breakout strategies to cheer about after getting tested for consecutive sessions and tilting plenty of at-risk technical indicators back into the red.

IG client* and CoT** sentiment for the Dow

Dow chart with retail and institutional sentiment

In sentiment, retail trader bias hasn’t moved much following the plummet compared to traders in the Nasdaq 100 where it’s approaching extreme buy territory. They prefer to remain shy of heavy buy bias rising only to 63%, though further price drops could entice more shorts into closing out.

*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 for the outer circle. Inner circle is from the previous trading day.

**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.