Stocks whipsaw on trade comments, weekend gaps get filled in volatile session
Lack of confirmation from Chinese side on trade talks leaves recent gains in equities at risk of being undone.
DOW: China-exposed stocks outperform in classic risk-on trade
The day might have started in a classic risk-off session with investors fleeing into safe haven assets and ditching equities that gapped lower initially, only for a reversal to take place on anticipation of US-China talks that were based on Trump’s comments that China wanted a deal, even if early reports from the latter showed it didn’t reach out. If the trade war worsens – and it’s still a very likely scenario – that would put recent gains at risk and hit China-exposed stocks like Apple as the main underperformers. While there’s technical bias forming with the index’s price below most of its main moving averages, trade rumors/talk/news could easily cause a shift in either direction, and entice breakout strategies over fading ones, with reversals only after significant retracement. In terms of bias, retail sentiment is up 9% to a majority short 63%, standing in significant contrast to extreme long institutional traders holding a 88% long bias.
NASDAQ: Finishing higher for the session but also at risk of reversal
Negative technical bias is also forming in this index with its price failing to significantly rise back up to the highs, even if it finished higher for the session on trade talk. Lower lows can’t be ruled out for equities, especially with a lack of confirmation in trade negotiations and a lack of a trade deal ensuring downside bias, especially for China-exposed stocks like Apple and Tesla that are more prone to both ups and downs depending on whether the trade rumors/news are positive or negative. Retail bias here has also moved higher but not by much, at a majority short 61% and near opposite majority long institutional bias of 60%.
DAX: Auto shares outperform in hopes German automakers will avoid US tariffs
This time around, it was auto shares that outperformed following Trump’s comments regarding tariffs on German automakers, though (as always) nothing has been confirmed and hence putting gains at risk of being undone. The index’s price gapped below the 200-day moving average but crossed and finished above it for the session. The fundamental outlook remains negative, with recessionary fears taking IFO’s business climate figure to its lowest in a decade. With the index’s price not that far off the lows where its short-term support level has been holding, the stalling and weakened bear trend technical overview needs little to shift back to a more consolidatory outlook. Retail bias has shifted once again, from a majority long 59% to a slight short 51% on long profit-taking and range-trading shorts entering.
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