Skip to content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Dow Jones, S&P 500 Forecast: Bullish Contrarian Trading Bias Remains in Focus

Dow Jones, S&P 500 Forecast: Bullish Contrarian Trading Bias Remains in Focus

Daniel Dubrovsky, Strategist

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

  • Retail investors continue to heavily short US major benchmark stock indices
  • Rising Dow Jones and S&P 500 short bets offer bullish contrarian trade bias
  • Looking at technical analysis seems to point to a different conclusion however
How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by Daniel Dubrovsky
How is IG Client Sentiment a contrarian indicator?
Get My Guide

According to IG Client Sentiment (IGCS), retail investors continue to aggressively short US benchmark stock indices such as the Dow Jones and S&P 500. IGCS is usually a contrarian indicator, especially in a trending market. If traders continue selling into recent price action seen on Wall Street, then there may be room for further upside potential in equities. For a detailed analysis about how you can use IGCS in your own trading strategy, check out last week’s recording to my biweekly webinar about the tool.

Dow Jones Sentiment Outlook - Bullish

The IGCS gauge implies that about 20% of retail investors are net-long the Dow Jones. Downside exposure has increased by 14.81% and 20.63% over a daily and weekly basis respectively. The fact that traders are net-short hints prices may continue rising. The combination of this and recent shifts in sentiment offers a stronger bullish contrarian trading bias.

The Quiz
Discover what kind of forex trader you are
Start Quiz
Dow Jones Sentiment Outlook - Bullish

Technical Analysis

Dow Jones futures have climbed to record highs as of late, pushing above the 34760 – 35000 resistance zone after months of consolidation. Still, negative RSI divergence shows that upside momentum is fading. That can at times precede a turn lower. Such an outcome could place the focus on the 100-day SMA, which may reinstate the dominant focus to the upside.

Dow Jones Futures Daily Chart

Dow Jones Futures Daily Chart

Chart Created in Trading View

S&P 500 Sentiment Outlook - Bullish

The IGCS gauge implies that 31% of retail investors are net-long the S&P 500. Upside exposure has increased by 1.62% and 9.07% over a daily and weekly basis respectively. The fact that traders are net-short hints that prices may continue rising. The combination of this and recent changes in sentiment are offering a stronger bullish-contrarian trading bias.

Equities Forecast
Equities Forecast
Recommended by Daniel Dubrovsky
Get Your Free Equities Forecast
Get My Guide
S&P 500 Sentiment Outlook - Bullish

Technical Analysis

S&P 500 futures are slowing making progress above the 4383 – 4416 resistance zone, but the pace has been quite slow. A Doji candlestick pattern has appeared, which is a sign of indecision. A downside close following the Doji could hint at further losses to come. Negative RSI divergence is also persisting. Keep a close eye on the 100-day SMA in the event of a material turn lower, the line may reinstate the focus to the upside.

S&P 500 Futures Daily Chart

S&P 500 Futures Daily Chart

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from August 11th 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.

DISCLOSURES