IG trader sentiment shifts in the DAX to extreme short
Heavy range-trading shifts retail sentiment in the DAX, pushes to heavy short territories in both Dow and Nasdaq.
DOW: Finishing higher for the week and not far off its mid-term resistance level
There are a few factors at play for indices at this stage, with (1) US-China trade talks turning more positive and a preliminary unwritten trade agreement yet to be inked, (2) the Fed buying up $60bn of Treasury bills per month without labelling it as quantitative easing (QE), and (3) earnings season upon us starting with financials this week having relatively outperformed last Friday. The net result of last week’s trade talks has taken indices higher for the week and as a result, traders shorting the index have been hit, with retail bias rising 10% since last Thursday (and 5% since the start of last week) to a majority short 70% as of this morning. As for Commitment of Traders (CoT) bias, it stands at an extreme long 88% and is up a notch even as long positions were reduced by 5,228 lots as opposed to a 1,198 reduction in shorts. While it’s a stalling bull trend overview on the weekly, the daily could be more volatile upon the release of any trade talk updates.
NASDAQ: More positive technical bias forming thanks to more positive trade talks
As with the Dow, the Nasdaq also registered gains late last week to finish the week in the green with its price resting near its mid-term resistance level and awaiting any further trade talk rumors/news. Its price is back above all its main short-term weekly moving averages, and IG’s retail sentiment bias is up 5% to a heavy short 73% at the start of this week. As for CoT bias, it’s dropping closer to the middle on a reduction in longs by 1,675 lots and standing at a majority long 58% The focus in terms of earnings will be on financials early on and hence affecting the Dow more so than the Nasdaq, but there will be some tech companies posting their earnings later in the week.
DAX: Friday’s big reversal in the DAX takes its price back to its mid-term resistance level
The index’s short-term resistance level was breached on Friday following the massive surge, and on the weekly chart is at its mid-term resistance level having crossed the last of its main weekly moving averages (MA), including the 100-week MA. Nearly all its technical boxes are ticking green, and while it’s a bull trend technical overview that stands at its mid-term resistance level, volatility strategies may be more ideal (in either direction) given the input of fundamental items that include trade talks and Brexit. As for IG’s retail trader sentiment, it was a big day for them on Friday and the bias has shifted from a slight majority long 51% at the start of last week to an extreme short 81% at the start of this week, for a staggering 32% change in sentiment.
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