Dow and Nasdaq drop as consumer sector takes a slight hit

Dow Technical analysis, overview, strategies, and levels

While the Dow experienced fresh record highs during yesterday’s session, those gains failed to hold following earnings from Home Depot and Kohl that disappointed, and put doubt as to whether the US consumer can continue to aid on the retail front, and where Home Depot’s stock was at the bottom in terms of underperforming with energy shares not that far off on the oil price drop. In terms of sectors, health care outperformed whereas energy and consumer discretionary were at the bottom. Lowe’s and Target are up next in terms of earnings. On the trade front, the US Senate Hong Kong bill and China’s expected retaliation may throw a wrench in current trade deal negotiations, while the US House approved legislation to avert a government shutdown with temporary funding extended through to December.

IG client and CoT sentiment for Dow

When it comes to sentiment, retail traders certainly aren’t complaining following yesterday’s moves, with extreme short bias dropping 7% to a heavy short 75% as averaged-in shorts get some relief.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

With indices globally mostly in the red, it was no surprise that the Nasdaq suffered a lower finish after making fresh record intraday highs in yesterday’s session. Nearly all its main technical indicators continue to flash green, but the gains on an intraday note have been done in a limiting fashion, testing breakout strategies that have been prone to stop out on a reversal back down, even if that reversal has been for a limiting time.

IG client and CoT sentiment for Nasdaq

The losses here have been less than that of the Dow, and as a result hasn’t given retail shorts initiated at higher price levels an opportunity to close out, with extreme short retail bias dropping only a notch compared to yesterday morning.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

As with US indices, the German DAX also made fresh intraday highs, only for those highs to be put into question on not just worse than expected US earnings, but also worries over the lack of a resolution on the trade front, and where political factors may dent the likelihood of a trade deal occurring. That has taken its price back down for the session to finish slightly lower, as its bull trend technical overview continues to stall. Out of Asia, shares there are relatively lower even after China slightly lowered its benchmark lending rate, as the mood this morning hasn’t been positive on the risk appetite front.

IG client and CoT sentiment for DAX

DAX chart with retail and institutional sentiment