Dow CoT bias further bearish despite record highs
Retail bias hits extreme sell territory in both Dow and DAX, underperformance in tech-heavy Nasdaq keeps retail traders holding an opposite heavy buy bias.
Dow Technical analysis, overview, strategies, and levels
Repeated fresh record highs for the Dow, and clear outperformance compared to the Nasdaq, keeping its key technical boxes flashing green and aiding conformist buy-breakout strategies on the Weekly, less so on the Daily as it initially retraced off of its previous 1st Resistance level late last week before eventually finishing above it. Friday's session put Boeing (new 737 MAX order) and Caterpillar on top, the handful finishing in the red showing Salesforce and Coca-Cola in the bottom. The $1.9tn stimulus package has been signed, and US economic data showed PPI beating estimates, preliminary UoM's consumer sentiment figure improving (though still below pre-pandemic readings) while inflation expectations dropped to 3.1%. We'll get manufacturing data later today.
IG client* and CoT** sentiment for Dow
As for sentiment, both retail and CoT speculators are opposite the price gains, the former in extreme sell territory at 81% while the latter rises to 71% on a drop in longs positions.
Dow chart with retail and institutional sentiment
Nasdaq Technical analysis, overview, strategies, and levels
Although the Nasdaq managed to finish the week higher, the gains weren't as strong as that of the Dow, didn't offer fresh record highs, and was met with turbulence in between as US yields finished higher. Weekly conformist buy-on-reversal off of its 1st Support level offered the most, conformist buy-breakout strategies tested on the difficulty getting past its previous Weekly 1st Resistance level. Zooming into the Daily and the overview is more conflicting, conformist buy-breakout generally winning out on Thursday's volatility. As for component performance on Friday, non-tech Walgreens and Fox finishing higher, the tech sector in retreat for the session dragging the tech-heavy index lower and where JD.com suffered the most.
IG client* and CoT** sentiment for Nasdaq
Majority short bias still remains for CoT speculators, but unlike the Dow where it has risen further into heavy sell territory, it has moved closer to the middle here instead from 59% to 55% on an increase in longs by 1,168 lots and shorts down 1,031.
Nasdaq chart with retail and institutional sentiment
DAX Technical analysis, overview, strategies, and levels
It was a strong week for the DAX, one that kept its key technical indicators in both time frames mostly flashing green, aiding conformist buy-breakout strategies on a breach of its Weekly 1st Resistance, but since then oscillating near the highs and failing to offer a play on the Daily late last week. Deutsche Telekom and Deutsche Bank relatively outperformed in Friday's rangebound session, plenty in the red where Delivery Hero, SAP AG (DE), and Daimler were in the bottom by the close. And while the attention was on Thursday's ECB where they announced they would accelerate asset purchases, we did have low-impacting German data on Friday that showed final CPI figures as expected. Third wave virus talk and weekend regional elections are the items taking the attention.
IG client*sentiment for DAX
When it comes to sentiment, as with the Dow where its price experienced fresh record highs, retail trader sell bias has jumped to the extremes. CoT bias for US indices is showing slight long S&P and Russell, while short Dow and Nasdaq.
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 for the outer circle. Inner circle is from the previous trading day.
** CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.
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