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S&P 500, Dow Jones to Hit New Highs? Retail Bets Paint Cautious View

S&P 500, Dow Jones to Hit New Highs? Retail Bets Paint Cautious View

2020-11-18 06:00:00
Daniel Dubrovsky, Analyst
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S&P 500, Dow Jones, Trader Positioning - Talking Points

  • Is retail positioning favoring more gains in US equities?
  • IG Client Sentiment, a contrarian indicator, suggests not
  • Breakouts in the S&P 500, Dow Jones lack confirmation
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US equities have climbed these past few weeks, with the S&P 500 and Dow Jones pushing into all-time high territory against the backdrop of positive Covid vaccine developments. Over the past 24 hours, they have pulled back cautiously however. Are the latest trends in retail positioning supporting the case for setting new highs? One way to gauge this is through IG Client Sentiment, which is typically a contrarian indicator.

S&P 500 Sentiment Outlook - Mixed

The IGCS gauge implies that about 38% of retail investors are net long the S&P 500. Upside exposure has increased by 8.06% from yesterday while decreasing 1.48% over a weekly basis. The combination of current sentiment and recent changes offers a further mixed trading bias despite the push higher in the index.

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S&P 500, Dow Jones to Hit New Highs? Retail Bets Paint Cautious View

S&P 500 Technical Analysis

While S&P 500 futures have pushed above the 3541 – 3587 resistance zone that has held since September, confirmation of a breakout seems lacking. Moreover, on November 9th the index left behind a fairly large upper shadow, establishing a potentially important price level at 3668. A drop back under the resistance zone exposes the 3198 – 3260 floor, opening the door to more consolidation.

S&P 500 Futures – Daily Chart

S&P 500, Dow Jones to Hit New Highs? Retail Bets Paint Cautious View

S&P 500 Chart Created in Trading View

Dow Jones Sentiment Outlook - Mixed

The IGCS gauge implies that about 31% of retail traders are net long the Dow Jones. While upside exposure has increased by 13.02% over a weekly basis, downside bets have climbed by 19% over the same period. From here, the combination of current sentiment and recent changes offers a further mixed trading bias despite the push higher in the index.

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S&P 500, Dow Jones to Hit New Highs? Retail Bets Paint Cautious View

Dow Jones Technical Analysis

Dow Jones futures have closed above the key 29263 – 29523 resistance zone and into all-time highs. However, confirmation of the breakout is lacking. Rising support from late October could maintain the near-term uptrend. But, a close under and back through the former resistance zone opens the door to facing the 25881 – 26407 floor. Negative RSI divergence also shows that upside momentum is fading. That may precede a turn lower, reinstating consolidation.

Dow Jones Futures – Daily Chart

S&P 500, Dow Jones to Hit New Highs? Retail Bets Paint Cautious View

Dow Jones Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from November 18th 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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