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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Dow and Nasdaq recover some lost ground

Trade deal between US and China expected to be signed on 15 January.

NASDAQ Source: Bloomberg

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.

Dow Technical Indicators Source: IG charts
Dow Technical Indicators Source: IG charts

IG client and CoT sentiment for Dow

Dow sentiment Source: IG charts
Dow sentiment Source: IG charts

Dow chart with retail and institutional sentiment

Dow Source: IG charts
Dow Source: IG charts

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.

NASDAQ Technical Indicators Source: IG charts
NASDAQ Technical Indicators Source: IG charts

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 sentiment Source: IG charts
Nasdaq sentiment Source: IG charts

Nasdaq chart with retail and institutional sentiment

Nasdaq Source: IG charts
Nasdaq Source: IG charts

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.

DAX Technical Indicators Source: IG charts
DAX Technical Indicators Source: IG charts

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 sentiment Source: IG charts
DAX sentiment Source: IG charts

DAX chart with retail and institutional sentiment

DAX Source: IG charts
DAX Source: IG charts
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This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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