Dow, Nasdaq and DAX suffer big drops

Dow Technical analysis, overview, strategies, and levels

Equities were in for a drop yesterday, with coronavirus infections surging and an IMF downgrade to economic projections certainly not helping. The Dow's price broke beneath yesterday's 1^st Support as conformist buys failed while contrarian sells offered more on the pivot point. All of the Dow's components finished in the red, the losses heaviest for Dow and Boeing while suffering the least was Walmart and Procter & Gamble. And with all US sectors finishing lower, losses were biggest for the energy sector following the plummet in oil, with defensive utilities contracting the least. There's plenty of US economic data on offer today following yesterday's light calendar, including final GDP (Gross Domestic Product) expected to show a -5% reading, durables that are expected to grow following two months of significant consecutive declines, and the weekly unemployment claims that could once against post a million plus figure.

IG client^* and CoT sentiment for Dow

In sentiment, retail bias has shifted to majority long.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

Although not hurt as heavily as the Dow, the tech-heavy Nasdaq was also in for a retreat yesterday off of the top of its bull trend channel to break well below yesterday's 1^st Support level and aid contrarian sell breakouts over conformist buys that failed on the move lower. Nearly all its components finished in the red, the losses greatest for hotel chain operator Marriott and travel site Expedia as coronavirus cases surge, and T-Mobile was amongst the few finishing in the green, the telecom titan announcing rights offering for nearly 20 million shares.

IG client^* and CoT sentiment for Nasdaq

While the bias has shifted to majority long in the Dow and to the middle in the DAX, it's still majority short here on what has been a relative lack of retracement in comparison as its price remains near recent record highs. That's not to say shorts didn't have a chance to unwind, as sentiment has dropped from a previous heavy short 67% to a more moderate 59% as of this morning.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

Here too conformist buy strategies were in for a failure as the DAX's price broke beneath yesterday key support levels to aid contrarian strategies instead, its price back below its 200-day moving average and continuing to test its current stalling bull trend technical overview. All its components finished in the red, the losses least for [shares:DPW-DEDeutsche Post] and EON while heaviest for volatile Wirecard, Daimler and Continental. In German data, IFO's business climate and expectations figures beat expectations, with its current assessment dropping from 84 to 81.3. Up next we'll get GfK's consumer climate figure expected to remain in negative territory, as well as the ECB's (European Central Bank) minutes, of importance given the reliance of equities on ongoing stimulus measures.

IG client^* and CoT sentiment for DAX

In sentiment, retail traders are known to heavily range-trade the German index, and the price drop yesterday has shifted the bias from majority short 56% 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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