Dow, Nasdaq, and DAX take a hit as trade optimism fades

Trade deal likely won’t be signed this year, as political woes add a new dimension to getting an agreement.

Dow Technical analysis, overview, strategies, and levels

The trade war headlines has kept indices like the Dow busy, and the lack of optimism on that front combined with political issues complicated by the Hong Kong bill passed in both the House and Senate and awaiting the President’s approval certainly places another factor in the context of getting a trade deal signed, and the latest reports say it could be delayed until next year. In terms of earnings, Lowe’s impressed compared to Home Depot, the latter a component on the Dow. Overall, in terms of sectors, energy outperformed with utilities while materials, tech and industrials took a hit. More US housing data will be released today following Tuesday's mixed results, and there will also be the Fed's Bank of Philadelphia manufacturing index reading prior to tomorrow's Markit estimate.

IG client and CoT sentiment for Dow

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

As with the Dow, the Nasdaq too suffered retracement off the highs, where a lack of upside momentum has dented its current stalling bull trend technical overview. While some of its technical indicators have shifted away from a bullish viewpoint, most of its main indicators are still flashing green, and where buy only after a reversal (not fading) strategies have managed to bear some fruit.

IG client and CoT sentiment for Nasdaq

As for sentiment, while retail bias is extreme short at 79%, it is little changed since yesterday despite the retracement, as the bulk of those shorts have been initiated at lower price levels and will be in need of further moves back down to unwind in profit.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

ECB (European Central Bank) minutes will be released today, which affects assets in terms of monetary easing pushing more money into riskier assets like equities, and tomorrow's ECB president Lagarde speech matters within that context. On a more direct front, preliminary manufacturing and services PMI (Purchasing Managers Index) figures will be released for Germany (as well as the Eurozone in general), and expectations are for ongoing contractions for the former and barely any expansion for the latter. As for the DAX’s performance yesterday, it too suffered a hit which has put another dent in its stalling bull trend technical overview. Asia is down significantly this morning on trade woes, and that could seep further into European equities where export-oriented companies there are also in need of an improved trade atmosphere.

IG client and CoT sentiment for DAX

In terms of sentiment, retail shorts have been slowly unwinding on the price drop, but given most of these shorts (as is the case with other indices as well) are initiated at lower price levels, it’ll require further downside movement to unwind shorts in profit.

DAX chart with retail and institutional sentiment

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