End of week retracement in Dow provides slight relief to heavy short retail traders

But the pressure is still on for both Nasdaq and DAX retail bias.

Dow Technical analysis, overview, strategies, and levels

After enjoying fresh record highs towards the middle of last week, the end of it was met with slight retracement as on Friday there were more stock prices lagging with underperformers including energy stocks like Chevron. For US sectors overall, defensive real estate and utility stocks outperformed, while energy was more firmly in the red. Reports that the White House is attempting to make investing in the stock market more tax friendly could improve risk appetite, and on the earnings front Wal-Mart will be announcing its results tomorrow. The latest out of coronavirus news shows the number of new cases dropping, but on the flip side the Fed is expected to trip its repo market interventions starting this week.

IG client* and CoT sentiment for Dow

In sentiment, retail bias is still heavy short but reduced from last week’s 76%. CoT (Commitment of Traders) speculators bias is down a notch but in extreme long territory standing at 81%, with a reduction in long positions by 5,151 lots outdoing a smaller reduction in short positions by 862 lots.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

Fresh record highs has become a common theme for the Nasdaq, and on Friday it was a notch higher where Expedia was on top despite mixed earnings results on expectations of big cost-cutting. Nvidia was number two in terms of performance following its earnings release that easily beat expectations. But not all its components were in the green, with Liberty Global at the bottom following a loss in subscribers and American Airlines also heavily in the red. A US bank holiday today means its less likely the action won’t pick up towards weekly levels until later, and last week’s buy breakout on the Weekly 1st Resistance panned out.

IG client* and CoT sentiment for Nasdaq

The lack of retracement here has meant that heavy short retail traders continue to feel the heat here, with the bias 5% higher than last week’s heavy short 67%. CoT bias on the other hand has dropped significantly and is only slightly majority long at 53% with Nasdaq consolidated shorts rising by 3,211 lots outdoing a smaller increase in longs by only 699 lots.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

After making fresh record highs last week, the DAX finished only slightly higher in the green, and where plenty were in the red including car shares, even as automakers are set to resume production in China (Germany’s biggest export market) despite ongoing coronavirus fears. German preliminary GDP (Gross Domestic Product) was a disappointment failing to show any growth with a 0% reading. In terms of price action, despite breaching last week’s Weekly 1st Resistance it failed to offer much beyond it.

IG client* and CoT sentiment for DAX

Retail bias remains in extreme short levels rising to 82% and awaiting some form of retracement, running in contrast to its current technical overview on the weekly that’s shifted back to a stalling bull trend.

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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Trading Indices: Dow, Nasdaq and Dax – webinar on June 10 at 5:00pm

Join us as we discuss: risks involved with trading a stock vs. an index, the index's components and what they track, bonds vs. indices, and risk-on vs. risk-off, factors such as central bank easing, buybacks, and big funds, and a trading overview and analyzing sentiment for the Dow, Nasdaq, and DAX.

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