DAX 30, FTSE 100, CAC 40 Forecast: Rising Long Bets Leave European Stocks at Risk
DAX 30, FTSE 100, CAC 40, Technical Analysis, Retail Trader Positioning - Talking Points
- Retail traders increasing upside exposure into European stocks
- The DAX 30, FTSE 100 and CAC 40 may be vulnerable to losses
- IG Client Sentiment (IGCS) is typically a contrarian indicator
Recent jitters in global equity markets are fueling rising long positioning bets into stocks from retail investors, opening the door to further losses. These include European ones, like the DAX 30, FTSE 100 and CAC 40. This can be demonstrated by using IG Client Sentiment (IGCS), a gauge of retail investor positioning.
IGCS is typically a contrarian indicator, meaning that if upside exposure is increasing in an asset, prices could be vulnerable to a pullback and vice versa. For a further analysis of this tool, where I also demonstrate how you can use it in a trading strategy, check out a recording of a recent webinar I hosted here.
DAX 30 Sentiment Outlook - Bearish
The IGCS gauge implies that about 25% of retail traders are net long the DAX 30. Upside exposure has climbed by 15.59% and 45.49% 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.
From a technical standpoint, further losses in the DAX 30 could see prices test the 20-day Simple Moving Average (SMA). The latter is hovering around the 38.2% Fibonacci extension at 14332, making for a key point of support. Down the road, rising support from November may reinstate the dominant upside focus.
DAX 30 Daily Chart
FTSE 100 Sentiment Outlook - Bearish
The IGCS gauge implies that about 71% of retail investors are net long the FTSE 100. Upside exposure is on the rise, increasing by 5.68% and 29.10% over a daily and weekly basis respectively. The combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias.
While the FTSE 100 may be at risk of losses in the near-term, rising support from November could reinstate the upside focus – see chart below. However, breaching this range could open the door to deeper losses. Otherwise, resuming the uptrend entails clearing the 6879 – 6964 resistance zone.
FTSE 100 Daily Chart
CAC 40 Sentiment Outlook - Bearish
The IGCS gauge implies that about 40% of retail traders are net long the CAC 40. Upside bets have increased by 10.65% and 44.62% 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.
The CAC 40 could be at risk of reversing gains since November should prices manage to confirm a break under a bearish Rising Wedge chart pattern. Such an outcome may place the focus on the 50-day SMA below as well as the 38.2% Fibonacci extension at 5841. Key resistance seems to be the 6065 – 6109 zone.
CAC 40 Daily Chart
*IG Client Sentiment Charts and Positioning Data Used from March 23rd 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.