Risk-on takes Dow and DAX to a higher finish

Dow Technical analysis, overview, strategies, and levels

The Dow didn't just finish higher yesterday but finally breached its short-term resistance level to keep its bull trend technical overview intact. The moves were buoyed by a risk-on environment with lockdown restrictions easing and better than expected US data with new home sales beating expectations by a health margin, housing price data continuing to grow, and CB's consumer confidence improving even if it failed to match expectations. Amongst its components, financials' Goldman Sachs and Morgan Chase were outperformers, the latter's CEO saying the bank was "very valuable" at current prices, with a handful in the red that included tech giants' Microsoft and Apple. Health and tech aside, the remaining sectors were in the green with financials and industrials registering the biggest gains.

IG client* and CoT sentiment for the Dow

The latest moves haven't been in favor of retail traders holding a heavy short bias close to that of CoT (Commitment of Traders) speculators, the latter raising that bias to a heavy short 71% on an increase in shorts by 12,202 lots outdoing a 4,639 lot increase in longs.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

The Nasdaq underperformed this time around failing to match the performance of the Dow, as while there were outperformers that included Ulta Beauty (which will release its earnings tomorrow) and Walgreens (anticipating more flu vaccine shots), there were plenty in the red including both Vertex and Regeneron Pharmaceuticals – the latter to buy back most of Sanofi's 20% stake in the company – as well as stocks that outperformed during the lockdown period unwinding including Netflix, Nvidia, and Activision. There's also worsening US-China relations to contend with given US measures will be announced towards the end of this week.

IG client* and CoT sentiment for Nasdaq

In sentiment, retail short bias has dropped instead of rising as is the case with the Dow and DAX given the retracement in price offering a chance for fresh and averaged-in shorts to close out. As for CoT speculators, the bias has shifted to majority short on an increase in shorts by 1,780 lots and a reduction in longs by 901 lots.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

A higher finish for the DAX that breached and closed above its short-term resistance level to keep the German index's bull trend technical overview intact where most of its main technical indicators are flashing green, even if its price failed to close above its 100-day moving average yesterday. Here too, financials outperformed with Deutsche Bank taking the largest gains, and where Lufthansa was second-best after it agreed to a €9bn rescue deal with Germany. In German data, GfK's consumer climate figure while still in negative territory improved on expectations with its previous figure revised higher, and ahead of potential fiscal and central bank speak today.

IG client* sentiment for the DAX

Retail short bias is heaviest here on a lack of retracement and the excessive range-trading usually witnessed, with majority sell bias the highest of the three at 70%.

DAX chart with retail 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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