Dow and Nasdaq recover some lost ground
Trade deal between US and China expected to be signed on 15 January.
Dow Technical analysis, overview, strategies, and levels
2019 was certainly a great year for indices, and for the Dow resulted in big gains and keeping both its weekly and daily technical overviews in that of a bull trend, and where the bulk of its main technical indicators are flashing green. While buy breakout opportunities have been tested as of late, the brief dip earlier this week did present a reversal opportunity. Those who have been tested are heavy short retail traders, desperately waiting for retracement back down to undo shorts the bulk of which have been initiated at lower price levels. In terms of sector performance, all of its sectors were in the green led by materials and energy, and where few of its components were in the red which included Walmart and Boing. In trade news, the US-China trade deal is expected to be signed on January 15.
IG client and CoT sentiment for Dow
Dow chart with retail and institutional sentiment
Nasdaq Technical analysis, overview, strategies, and levels
In terms of outperformers, the Nasdaq in 2019 certainly took that award with near 38% gains (not factoring in dividends which would have taken that percentage slightly higher) as tech stocks got snapped up not just on improved risk appetite, US Federal Reserve intervention in the repo market pushing liquidity into riskier assets, a trade war that avoided significant expansion into the tech sector, but also on investor interest in low-cost companies that may be able to avoid heavy losses should the economy experience contraction in the future. Buy on reversal strategies panned out earlier in the week, but overall momentum has been lagging. Furthermore, at this stage should any significant retracement occur, and contrarian strategies may start to look more attractive.
IG client and CoT sentiment for Nasdaq
In terms of sentiment, retail bias here is little changed and – more so than the Dow – remains in heavy short territories.
Nasdaq chart with retail and institutional sentiment
DAX Technical analysis, overview, strategies, and levels
With a German bank holiday on Tuesday and the holiday the day after, the DAX has opened this morning slightly higher, with the real gains in Chinese shares following news of a cut in its central bank reserve requirement ratio. In terms of data, Germany’s manufacturing PMI (Purchasing Managers Index) figure will be released, expected to remain in contracting sub-50 territory for its twelfth consecutive month.
IG client and CoT sentiment for DAX
On the sentiment front, retail bias here has a tendency to swing more violently than with other indices (as well as non-indices in this report), and hence expect big percentage changes should any sizeable price move occur.
DAX chart with retail and institutional sentiment
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