Weekly bullish technicals get tested for Dow, Nasdaq, and DAX
Worsening global economic data tests bullish technicals in Dow and Nasdaq, while DAX weekly outlook turns volatile.
DOW: Retail bias shifted last week, and with further gains could shift again
The index’s price briefly crossed below its 50-day weekly moving average before crossing back up and posting a significant recovery, though still ending the week in the red. The squeeze lower was a boon for retail traders whose heavy short 72% bias at the start of last week shifted to finish majority long at 54%. However, should price recover further, and we could see another shift back to majority short again, especially if range-trading continues. Commitment of Traders (CoT) bias however, has barely budged and remains in extreme long territories at 87%. While a buy on reversal panned out, the increased volatility means breakout strategies (up or down) might bear more fruit and fading strategies should be avoided altogether, even if risk-taking might be limited with earnings season on the horizon.
NASDAQ: Finishing higher for the week despite a significant price drop earlier in the week
Although the Dow finished the week in the red, this tech index finished in the green after a brief scare earlier in the week. And given price wasn’t close to the highs to begin with, the heavy retail short bias here wasn’t at stronger levels like that of the Dow, with the bias now in the middle at the start of this week and down 16% from the start of last week. Retail shorts took profit after Tuesday and Wednesday’s price drop, while institutional bias has instead risen by 6% on an increase in longs by 1,062 lots and a simultaneous decrease in shorts by 1,536 lots. While the technical bias remains positive, a buy on fade should be avoided with breakout and reversal strategies more ideal instead.
DAX: Long-term bull trend technical overview undone
The DAX suffered heavily last week and failed to recover from those losses, with the only item giving it a leg to stand on is upcoming ECB bond-buying. In the absence of that, and German data continues to disappoint, its economy on the verge of a recession, and with a trade war brewing between the US and the EU which could worsen should any retaliatory tariffs be announced. In terms of bias, retail sentiment has also shifted here from a heavy short 65% at the start of last week to a majority long 58% prior to the start of this week, and for the same reason as the Dow and Nasdaq: short profit-taking. While intraday has been met with plenty of consolidatory days, the big moves when they occur would entice breakout strategies on the weekly levels than reversals or fading ones.
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