Retail short bias drops in Dow and Nasdaq, surges in the DAX

Dow Technical analysis, overview, strategies, and levels

Although last week was a red one for the Dow, a brief look at the weekly chart and far more will be needed to undo its current bull trend technical overview that’s been stalling at the highs. Most of its components were in the red, and where in terms of sector performance only the defensive utility stocks were in the green. Health care and financials bore the brunt of the drop, and if fears over the corona virus persist it’ll likely factor into further negative market movement. In terms of earnings, there isn’t much today but it’s a big week for tech stocks and hence the tech sector (and the Nasdaq tech index).

IG client and CoT sentiment for Dow

The latest price drops aren’t hurting retail traders however, with heavy short bias dropping 6% over the course of last week as some averaged-in shorts exit. CoT (Commitment of Traders) bias has risen instead to a heavy long 77% on a reduction in short positions by 2,342 lots and a small increase in longs by 316 lots.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

It's a big week in earnings for the Nasdaq, as some of the tech index's components will be releasing their earnings including Apple on Tuesday, Microsoft, Facebook and Tesla on Wednesday, and Amazon on Thursday. On Friday it was hurt by the decline in equities globally, but as a component intel was on top after its earnings and revenue beat expectations. Compared to the Dow, the Nasdaq made fresh record highs intraweek, and only ended slightly in the red.

IG client and CoT sentiment for Nasdaq

That has meant retail short positioning hasn’t been able to drop much, down only a notch on last week’s 73% short bias. Meanwhile, larger speculative traders according to the latest CoT report have reduced their majority long bias to only 53% on an increase in Nasdaq consolidated shorts by 1,572 lots and is on the verge of shifting to majority short.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

Unlike US indices, the DAX finished higher for the week (and for Friday’s session), though the auto sector was tested as focus shifts from the US-China trade front to the US-EU, and where the European auto sector is at great risk of being caught in the crossfire. The ECB’s (European Central Bank) decision to keep monetary policy unchanged and its bond purchasing program intact has aided riskier assets like equities, and where German 10-year government bond yields plummeted further into negative territory. Today's economic calendar includes IFO’s business climate sentiment figures. While all its main technical indicators are flashing green, the lack of upside movement has tested buy breakout strategies and has meant its weekly bull trend overview has continued to stall.

IG client and CoT sentiment for DAX

Retail bias started the week at a heavy short 76%, but heavy range-trading in this German index has meant the slight gains has taken it to extreme short levels at 82%.

DAX chart with retail and institutional sentiment