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Dow Jones, S&P 500 Forecast: Retail Trader Signals Hint of a Turn Lower

Dow Jones, S&P 500 Forecast: Retail Trader Signals Hint of a Turn Lower

Daniel Dubrovsky, Strategist

Dow Jones, S&P 500, Technical Analysis, Retail Trader Positioning - Talking Points

  • IG Client Sentiment warns that the Dow Jones and S&P 500 may fall
  • Upside momentum seems to be fading, raising the risk of a turn lower
  • Check out the webinar recording for an in-depth breakdown of IGCS

In this week’s webinar, I covered the outlook for equities like the Dow Jones and S&P 500 using IG Client Sentiment (IGCS). IGCS is typically a contrarian indicator. For a more in-depth analysis of where these assets may go, including coverage of fundamentals, check out the recording of the session above.

Dow Jones Sentiment Outlook - Bearish

The IGCS gauge implies that about 31% of retail traders are net long the Dow Jones. Downside exposure has decreased by 13.02% and 11.05% over a daily and weekly basis respectively. Recent changes in sentiment warn that the current price trend may soon reverse lower despite the fact traders remain netshort.

Dow Jones, S&P 500 Forecast: Retail Trader Signals Hint of a Turn Lower

Technical Analysis

Negative RSI divergence shows that upside momentum in the Dow Jones is fading. This can at times precede a turn lower. Prices are struggling to push above the 38.2% Fibonacci extension at 31551. Immediate support seems to be at the 31188 inflection point. A turn lower may place the focus on rising support from March.

Dow Jones Futures Daily Chart

Dow Jones, S&P 500 Forecast: Retail Trader Signals Hint of a Turn Lower

Dow Jones Chart Created in Trading View

S&P 500 Sentiment Outlook - Bearish

The IGCS gauge implies that roughly 46% of retail traders are net long the S&P 500. Upside exposure has increased by 7.41% and 27.61% over a daily and weekly basis respectively. Recent changes in sentiment warn that the current price trend may soon reverse lower despite the fact traders remain netshort.

Dow Jones, S&P 500 Forecast: Retail Trader Signals Hint of a Turn Lower

Technical Analysis

Negative RSI divergence warns that upside momentum is fading in the S&P 500. Further losses may place the focus on rising support from March – see chart below. A drop through it would expose lows from January. Uptrend resumption, on the other hand, could place the focus on 3975, the midpoint of the Fibonacci extension.

S&P 500 Futures Daily Chart

Dow Jones, S&P 500 Forecast: Retail Trader Signals Hint of a Turn Lower

S&P 500 Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from February 24th Report

--- Written by Daniel Dubrovsky, Strategist 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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