Central bank injection aids risk appetite, Nasdaq at fresh record highs

Dow Technical analysis, overview, strategies, and levels

With risk-related flows dominating but in favor of risk (despite a lack of a solution on the coronavirus front) and news of fresh central bank injections in China and attempts at limiting short-selling, the Asian session witnessed a recovery, which in turn took the Dow higher aiding conformist breakout strategies over contrarian reversals. In earnings, Disney’s beat expectations, and its no surprise that it was one of the outperformers in terms of the Dow’s components, with Apple and Microsoft at the top as the tech sector outperformed. All the main sectors were in the green with the exception of defensive utility stocks, and few components contracting including energy giant ExxonMobil as well as Travelers.

IG client^* and CoT sentiment for Dow

In sentiment, retail bias has shot back up rising 10% to a heavy short 70%, standing in significant contrast to extreme long speculative traders from last Friday’s CoT (Commitment of Traders) report.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

The Nasdaq surged to a fresh record high yesterday as the ‘risk-on’ move aided the tech sector more than any other sector, and where yesterday's focus was once again on Tesla, which surged to fresh record highs and squeezed short positions further. That has kept the tech index’s bull trend intact, though keep in mind that aside from days like yesterday the bulk of them have been relatively limiting in terms of upside movement and buy breakout opportunities. In terms of Nasdaq’s components, Tesla was on top followed by eBay which also enjoyed a surge following a report that there’s been an acquisition bid by Intercontinental Exchange.

IG client^* and CoT sentiment for Nasdaq

On the sentiment front, retail bias here has also risen considerably and is back near extreme short levels, as the lack of retracement back down has given shorts here a lesser chance of unwinding positions in profit.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

With the Asian session recovering despite no improvement on the coronavirus front with the numbers continuing to rise, the reasoning may have more to do with the PBoC (People’s Bank of China) pumping more liquidity in the system, and where reports emerged that Chinese banks were told to provide more liquidity and attempts at limiting short-selling similar to what was witnessed in 2015. For the German DAX, nearly all its components were in the green yesterday, and the moves were in line with conformist breakout strategies that witnessed pivot points breaking when significant risk-related moves occur (be it to the upside or downside), its price closing just above its 50-day moving average.

IG client and CoT sentiment^* for DAX

As for retail bias, range-trading has a tendency to be heaviest here, and the one-day move has pushed retail bias 16% higher from yesterday’s slight majority short 55% to a now heavier 71% bias.

DAX chart with retail and institutional sentiment

^* The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%.

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