Equities in retreat this morning as China virus fears grow
Majority short retail bias in Dow and DAX drops while Nasdaq short bias rises following a fresh record high in the tech index.
Dow Technical analysis, overview, strategies, and levels
Although yesterday morning witnessed a slight recovery off of the lows, fears of the virus have shake Asian indices this morning and sent futures lower. Yesterday’s performance showed tech stocks’ intel and IBM at the top, the former set to announce its results today and the latter’s results beating expectations. That put tech stocks as a sector on top, and where the energy sector suffered as travel stocks globally take a hit. No surprise then, that Boeing was near the bottom with Johnson & Johnson not that far off following its earnings release. From a technical standpoint – and it’ll mean less with the global focus now on risk appetite and the China virus – its bull trend on the daily has been stalling near the highs.
IG client and CoT sentiment for Dow
The three consecutive days of losses have been a slight boon for retail traders holding a heavy short bias, and some have begun to unwind with the bias dropping 3% to a heavy short 71%, standing in exact contrast to CoT (Commitment of Traders) report bias at a heavy long 71%.
Dow chart with retail and institutional sentiment
Nasdaq Technical analysis, overview, strategies, and levels
A string of earnings releases for the Nasdaq today that involve intel, American Airlines, and Comcast. And while airline stocks are more concerned with the recent virus and dented travel plans, tech stocks will focus on intel's results following IBM's better than expected results on Tuesday. And Comcast will be in focus in light of the recent streaming wars and its plans to launch its own free and paid streaming service this year. Technicals are expected to be a smaller factor in determining this tech index's movement in the fact of potentially changing risk appetite and earnings releases, though as it stands it remains a bull trend technical overview stalling in the sense of not offering significant buy breakout opportunities intraday following yesterday’s intraday record high.
IG client and CoT sentiment for Nasdaq
Given the lack of retracement here compared to the Dow, retail bias hasn’t dropped but instead risen to a heavy short 73%.
Nasdaq chart with retail and institutional sentiment
DAX Technical analysis, overview, strategies, and levels
While it’s tempting to view the short-term technical overview as bullish (as is the case with its weekly overview) especially following a fresh intraday record high for the DAX yesterday, thus far the lack of follow through intraday has been limiting. Daimler was at the bottom in terms of its components following its third profit warning for 2019, and other car companies’ share prices were also suffering in the red. There is a significant item on the economic calendar however, and that's the ECB (European Central Bank) whose ongoing monetary easing will be crucial in determining appetite for riskier assets in the face of negative-yielding German government bonds such as its 10-year bund.
IG client and CoT sentiment for DAX
In terms of sentiment, the retracement back down has aided retail traders trying to unwind averaged-in shorts, with the bias dropping 9% between yesterday’s extreme short 80% to today’s heavy short 71%.
DAX chart with retail and institutional sentiment
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