Dow gaps on the open, Nasdaq CoT bias shifts
Vaccine news, ongoing rising coronavirus cases, and US fiscal stimulus items to note.
Dow Technical analysis, overview, strategies, and levels
Relatively rangebound movement for the Dow, staying within both Weekly and Daily levels and continuing to hug the highs, enough for its most of its key technical indicators in both the short and long-term to remain flashing green. Disney was the clear outperforming component by the close (record high following investor day presentation late on Thursday), Microsoft and Honeywell also amongst the minority of those finishing Friday in the green. Economic data out of the US is absent today, the focus for this week to see if a fiscal stimulus package and the budget can be agreed upon, as well as the Fed’s forecasts on Wednesday. Vaccine news over the weekend has given it a gap higher this morning in the futures market.
IG client* and CoT** sentiment for Dow
Meanwhile, CoT speculators have upped their long positions by 2022 lots and outdoing a 218 lot increase in shorts, the net result taking the majority short bias from 64% to 60%. Retail traders have also reduced their sell bias sizably since the start of last week, dropping from near extreme short levels of 74% to a less heavy 67%.
Dow chart with retail and institutional sentiment
Nasdaq Technical analysis, overview, strategies, and levels
Despite pullback last week, the overall technical overview remains bullish, and its price stayed within last week's Weekly levels, while offering a conformist buy-on-reversal off of its Daily 1st Support on Thursday. US sector performance was mixed on Friday, small losses for tech compared to energy and financials, and where amongst its components Alexion (AstraZeneca to purchase it for $39bn) was amongst the outperformers, while Qualcomm and Skyworks lagged heavily on reports Apple will build its own modem chips.
IG client* and CoT** sentiment for Nasdaq
As for sentiment, we've got a shift in bias from a previous majority short 57% to a now slight majority long 53% thanks to a massive unwinding in short positions by 5,687 lots and a small increase in longs by 652 lots. Fresh retail shorts used last week's light price drop to unwind some shorts with the bias dropping from 61% at the start of last week to a slight 51%.
Nasdaq chart with retail and institutional sentiment
DAX Technical analysis, overview, strategies, and levels
We finally got movement on Friday for the German DAX, breaking beneath its key Daily Support levels to aid contrarian sell breakout strategies (the conformist buy-on-reversal should ideally be initiated after the level is broken first, waiting to see if prices recover, it didn't offer a reversal opportunity off the 1st Support level in Friday's clean break lower). It stayed within its Weekly levels however, and a glimpse at the chart shows its mid-term Resistance level holding for now. Most of its components were in the red on Friday with the losses biggest for Deutsche Bank, Allianz and EON, Delivery Hero one of the few finishing higher. We've got some low-impacting data today with German WPI and industrial production for the bloc, while in coronavirus news the country will go into hard lockdown until January 10.
IG client*sentiment for DAX
The pullback in price was a plus for retail traders holding a majority short bias, reaching a heavy 65% mid-week before dropping to just 57% at the start of this week. They are majority short Dow, Nasdaq and DAX while long ASX, and in the middle for the S&P. CoT sentiment isn't available for European indices, but for US indices they are majority short Dow and S&P 500, and have shifted to majority buy in the Nasdaq, a long bias already held by larger speculators in the Russell.
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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