Dow Jones, DAX 30, Technical Analysis, Retail Trader Positioning - Talking Points
- Rising retail trader short bets in the Dow Jones and DAX 30 offer bullish signals
- Dominant uptrends remain intact, but momentum could risk fading if prices rise
- Check out the recording of the webinar on IGCS for an overview of the tool
In this week’s session on IG Client Sentiment (IGCS), which is a tool to gauge retail trader positioning, I discussed the outlook for the Dow Jones and DAX 30. IGCS is usually a contrarian indicator. For detailed analysis, check out the recording of the session above, where I discussed how to use IGCS in a trading strategy. I also covered the fundamental outlook for the two indices.
Dow Jones Sentiment Outlook - Bullish
The IGCS gauge implies that about 37.45% of retail traders are net long the Dow Jones Industrial Average. Upside exposure decreased by 10.37% and 18.21% over a daily and weekly basis respectively. The fact traders are net-short hint prices may continue rising. The combination of current sentiment and recent changes offers a stronger bullish contrarian trading bias.
Technical Analysis
Rising support from March 2020 continues to maintain the dominant upside focus for the Dow Jones after prices recently bounced off the trendline. A push above immediate resistance at 34483 could open the door to revisiting the May 10th high at 35000. But, keep an eye on RSI. Negative divergence could emerge, showing fading upside momentum. That can at times precede a turn lower.
Dow Jones Futures Daily Chart
DAX 30 Sentiment Outlook - Bullish
The IGCS gauge implies that about 24% of retail traders are net long the DAX 30. Upside positioning decreased by 19.70% and 22.87% over a daily and weekly basis respectively. The fact that traders are net-short suggests the prices may continue rising. The combination of current sentiment and recent changes offers a stronger bullish contrarian trading bias.
Technical Analysis
The DAX 30 is attempting to push into new all-time highs, but is struggling around key resistance at 15501. Negative RSI divergence does warn that upside momentum is fading, which can at times precede a turn lower. Such an outcome may place the focus on support at 14816, which is the April low. But, the 50-day SMA could keep the focus tilted to the upside. Extending gains exposes the midpoint of the Fibonacci extension at 15911.
DAX 30 Daily Chart
*IG Client Sentiment Charts and Positioning Data Used from May 25th Report
--- Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
