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Dow Jones, S&P 500, AUD/USD Forecast: Signals in Trader Positioning

Dow Jones, S&P 500, AUD/USD Forecast: Signals in Trader Positioning

Daniel Dubrovsky, Strategist

Dow Jones, S&P 500, AUD/USD, Trader Positioning - Talking Points

In today’s webinar on IG Client Sentiment (IGCS), I discussed the outlook for US benchmark stock indexes such as the Dow Jones Industrial Average and S&P 500. Then I analyzed the growth-oriented Australian Dollar. For a further synopsis of retail positioning, technical and fundamental analysis, check out the recording of the session above.

Dow Jones Sentiment Outlook - Bearish

The IG Client Sentiment (IGCS) gauge implies that 35.86% of retail traders are net long the Dow Jones. Short bets have declined by 9.48% and 9.27% over the past 24 hours and week respectively. Recent changes in sentiment warn that the current price trend may soon reverse lower despite the fact traders remain netshort. From a psychological standpoint, that could imply a falling share of investors attempting to pick the next top.

Dow Jones, S&P 500, AUD/USD Forecast: Signals in Trader Positioning

Dow Jones Technical Analysis

Dow Jones futures have left behind a Dark Cloud Cover candlestick pattern. This is a bearish formation which with downside confirmation, could signal that the trend may reverse lower soon. That may place the focus on rising support from the middle of May – red line. If this trend line holds, then the dominant uptrend could remain intact. Otherwise, prices may shoot for the 28197 – 28084 inflection range ahead.

Dow Jones Futures - Daily Chart

Dow Jones, S&P 500, AUD/USD Forecast: Signals in Trader Positioning

Dow Jones Chart Created in Trading View

S&P 500 Sentiment Outlook - Bearish

The IGCS gauge implies that 28.39% of retail investors are net long the S&P 500. Those that are exposed to the downside have declined by 2.97% and 10.38% over the last day and week respectively. Recent changes in sentiment warn that the current price trend may soon reverse lower despite the fact traders remain netshort. Rising net long bets would imply a higher percentage of traders trying to pick the next bottom.

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Dow Jones, S&P 500, AUD/USD Forecast: Signals in Trader Positioning

S&P 500 Technical Analysis

S&P 500 futures are struggling to push past former support established at the beginning of this year. It appears to be acting as new resistance within the vicinity of 3213. Clearing this price would expose the 3337 inflection point on the way towards the record high. Otherwise a drop through rising support from the middle of May could open the door to a reversal towards 2965.

S&P 500 Futures – Daily Chart

Dow Jones, S&P 500, AUD/USD Forecast: Signals in Trader Positioning

S&P 500 Futures Chart Created in Trading View

Australian Dollar Sentiment Outlook - Bullish

The IGCS gauge implies that 30.18% of retail traders are net long AUD/USD. This is down from about a 60% upside bias in late March. Since then, prices have climbed over 21 percent. Recently, traders net short have climbed by 0.80% and 15.90% over yesterday and last week respectively. The combination of current sentiment and recent changes offers a strongerAustralian Dollar bullish contrarian trading bias.

Dow Jones, S&P 500, AUD/USD Forecast: Signals in Trader Positioning

Australian Dollar Technical Analysis

On the daily chart, AUD/USD has left behind a Bearish Engulfing candlestick pattern. With downside confirmation, this may signal that a top in the Aussie could be due. Such an outcome would thus place the focus on rising support from March – red line. That line may keep the dominant uptrend intact, opening the door for a future bounce. Further gains would expose the July 2019 high.

AUD/USD Daily Chart

Dow Jones, S&P 500, AUD/USD Forecast: Signals in Trader Positioning

AUD/USD Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from June 10 Report

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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