Technical overview remains bullish for Dow and Nasdaq, but fundamental concerns persist

Dow Technical analysis, overview, strategies, and levels

Fresh record highs have become a common occurrence for US indices, and the Dow was no exception to that rule last week. And with markets shut yesterday in the US due to a holiday, the focus has been on this morning’s Asian session which took a hit on a rise in risk aversion with a virus in China with larger ramifications due to the lunar new year, and not aided by the IMF’s (International Monetary Fund) reduction in its global growth forecasts due to the slowdown in emerging markets. In terms of earnings, IBM will be releasing their results today.

IG client and CoT sentiment for Dow

In sentiment, the latest figures for larger speculative traders out of the CoT (Commitment of Traders) report show long bias rising a notch to 71% on an increase in long positions by 2,434 lots outdoing an increase in short positions by 595 lots.

Dow chart with retail and institutional sentiment

Nasdaq Technical analysis, overview, strategies, and levels

Futures are pointing lower for the Nasdaq this morning, with its price close to its 1st Support on fundamental global concerns. Today will be an important one for one of its components, namely Netflix which will be reporting its earnings today. While the technical overview is bullish where nearly all its main indicators are flashing green (on both the daily and weekly), the question now is whether the bull run can hold, or be open to a retracement which would entice contrarian technical strategies instead.

IG client and CoT sentiment for Nasdaq

That would be the hope of retail traders who continue to hold a heavy short bias at 75%, while CoT bias is at an unchanged 57% long as both long and short positions rose by about 1K lots each.

Nasdaq chart with retail and institutional sentiment

DAX Technical analysis, overview, strategies, and levels

With risk aversion spreading through the markets this morning, whatever slight gains the DAX enjoyed yesterday are being undone this morning. In terms of its components, Deutsche Bank and Lufthansa were at the bottom, though should the current ‘risk-off’ scenario persist, and it’ll have more companies accompanying it in the red today. In terms of data, ZEW figures will be released expected to show an improvement for Germany.

IG client and CoT sentiment for DAX

As for sentiment, retail bias has pushed back into extreme short levels standing at 80%, and while they are beneficiaries of this morning’s drop, more will be needed to unwind the bulk of those short positions in profit.

DAX chart with retail and institutional sentiment