Week of reversals for indices as recessionary fears fail to subside – Weekly Market Report
Dow and Nasdaq managed to recover off the lows while DAX in need of ECB easing confirmation.
DOW: US data impresses but all eyes turn to Fed minutes and Powell speech
Last Thursday's retail beat expectations both overall and at its core with Empire's reading improving, but suffered with industrial production contracting and a drop in consumer sentiment, with housing data mixed. More housing data will be released this week (along with Home Depot’s earnings on Tuesday), but the real fundamental focus will be on Wednesday’s Fed minutes and Friday’s Powell speech to determine whether current market expectations of more rate cuts this year will hold. From a technical standpoint, its bearish on the daily and it’s a technical overview shift on the weekly to a more consolidatory outlook whereby contrarian strategies will be more ideal on an expected increase in volatility, and reversals and fading more prone to stop outs. Institutional bias is still extreme long, while retail bias experienced a shift mid-week as range-trading continues.
NASDAQ: Consolidatory moves as technical overview breaks
The outlook for the Nasdaq remains less negative than that of the Dow, with the daily and weekly overview more consolidatory now but with a trending ADX, and fundamental moves causing significant shifts in price. That is testing fading strategies heavily which ought to be avoided, and with preferential towards contrarian breakout for limited profit-taking and reversals after a significant retracement. Institutional bias has also dropped here but by much more, down 5% to a majority long 60% on a reduction in longs by 1.9K lots and an increase in shorts by 1K lots, and as a result is nowhere near extreme long bias of Dow institutional traders.
DAX: ECB easing expectations aid shares off the lows, but fundamental issues persist
It’s no surprise that the DAX has been suffering as of late, with last week’s preliminary GDP contraction out of Germany igniting recessionary fears, and that’s without any future US tariff application on (at least) German automakers occurring just yet. Shares ought to be lower then, save for the expectation of ECB easing forcing more money into riskier assets, especially with negative yields on both 10 and 30-year German government yields making the hunt for yield in a recession-prone country (and zone) ever tougher. In terms of sentiment, retail bias dropped 26% on Friday alone as range-trading longs took profit, but for the week it has risen 5% since last Monday to a healthier 58% bias. Technical bias remains to the downside ahead of Thursday’s German preliminary PMI figures, with the daily still in an initializing and stalling bear trend, and the weekly showing a trending ADX with its price beneath all its main weekly moving averages.
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