CoT short bias drops in the Dow

Dow Technical analysis, overview, strategies, and levels

Thursday's crash threw a wrench into the bull trend technical overview, especially on the daily. And while upside movement can't be ruled out, the overview is volatile on long-term pivot point breaks. Contrarian strategies outperformed last week at last, especially breakout strategies following the downside breach. A partial recovery on Friday meant there were plenty of the Dow's components recovering slightly, with Boeing outperforming with double digit gains, and the few in the red including retail giant Walmart and Merck. Only consumer staples and utilities contracted as a sector, the gains highest for real estate and financials.

IG client^* and CoT sentiment for Dow

It was a big week for retail traders given they were holding a heavy short bias of 69% at the start of last week, and since then that bias has dropped to a slight short 53% and on the verge of shifting to majority long should prices move lower. CoT (Commitment of Traders) speculators are still heavy short but reduced their bias prior to the plunge to 65% on an increase in longs by 1,026 lots and a reduction in shorts by 743 lots.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

While it was a red week for the Nasdaq following a brief intraweek high above 10,0000, the contraction was far less than that of the Dow, and has kept its daily bull trend channel intact, as well as its weekly bull trend line. Weekly pivot points offered a buy-on-reversal opportunity to aid conformist bull trend strategies, while the daily failed on Thursday's plummet. In terms of its components on Friday, Expedia was the outperformer, but plenty were in the red including Tesla suffering the biggest percentage drop after retracing back below the 1,000 level with a downgrade from both Morgan Stanley and Goldman Sachs.

IG client^* and CoT sentiment for Nasdaq

CoT bias is still majority long and down only a notch from last week's 55% buy bias on an increase in shorts by 260 lots and a reduction in longs by 229 lots. Retail sentiment on the other hand, finally had a chance to unwind shorts stuck at lower price levels, the bias dropping from a heavy short 70% at the start of last week to a majority short 58%.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

The technical overview is back to volatile for the German DAX, and ahead of the European Council meeting later this week to debate the coronavirus recovery fund. Last week's conformist buy strategies were in for a failure as contrarian sell strategies outperformed, even if in some instances there weren't any reversal opportunities on an increase in volatility and momentum. With the index finishing slightly higher on Friday, amongst its components Lufthansa was on top followed by Daimler, but plenty finished in the red including adidas, Fresenius, and Merck at the very bottom.

IG client^* and CoT sentiment for DAX

The big majority short positions accumulated by retail traders have been undone on last week's moves, with sentiment dropping from a heavy short 71% at the start of last week to the middle.

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%, as of today morning 8am.

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