S&P 500, Dow Jones, Technical Analysis, Retail Trader Positioning - Talking Points
- Retail traders aggressively sold recent gains on Wall Street
- Does this hint the Dow Jones and S&P 500 could extend gains?
- Both face key incoming resistance levels, will uptrend resume?
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![How to Use IG Client Sentiment in Your Trading](https://a.c-dn.net/b/2O1rDk/500x707Advanced-Sentiment.png)
![How to Use IG Client Sentiment in Your Trading](https://a.c-dn.net/b/2O1rDk/500x707Advanced-Sentiment.png)
According to IG Client Sentiment (IGCS), retail investors are increasingly betting that equities may weaken in the near term. Downside exposure is on the rise in the Dow Jones and S&P 500. At times, IGCS can be a contrarian indicator. If this trend in positioning extends, then volatility on Wall Street could continue cooling ahead. Fur a further breakdown of this tool, which includes fundamental analysis, check out the recording of this week’s webinar above!
Dow Jones Sentiment Outlook - Bullish
The IGCS gauge shows that 49.84% of retail traders are net-long the Dow Jones. Since the majority of traders are net-short, this suggests prices may continue rising. Upside exposure increased by 7.8% and 49.86% compared to yesterday and last week respectively. The combination of overall and recent changes in positioning are offering a bullish contrarian trading bias.
![Dow Jones Sentiment Outlook - Bullish](https://a.c-dn.net/b/3xjogk/Dow-Jones-SP-500-Outlook-Will-Wall-Street-Rally-Resume-as-Retail-Traders-Sell_body_Wall_Street_Client_Positioning.png)
Dow Jones Futures 4-Hour Chart
On the 4-hour chart, Dow Jones futures are facing a combination of a near-term falling trendline from the beginning of January and the 61.8% Fibonacci retracement at 35380. This follows a bullish crossover between the 20- and 50-period Simple Moving Averages (SMAs). Breaking above key resistance could open the door to extending gains towards the January peak at 36832. Otherwise, a turn lower may place the focus back on the 33031 – 33613 support zone.
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![Dow Jones Futures 4-Hour Chart](https://a.c-dn.net/b/1tSaxJ/Dow-Jones-SP-500-Outlook-Will-Wall-Street-Rally-Resume-as-Retail-Traders-Sell_body_Picture_5.png)
S&P 500 Sentiment Outlook - Bullish
The IGCS gauge shows that roughly 58% of retail traders are net-long the S&P 500. Since the majority of traders are still biased to the upside, this suggests prices may fall. However, downside exposure increased by 14.91% and 44.52% respectively. The combination of overall and recent changes in retail trader positioning is offering a bullish contrarian bias.
![S&P 500 Sentiment Outlook - Bullish](https://a.c-dn.net/b/4juNeL/Dow-Jones-SP-500-Outlook-Will-Wall-Street-Rally-Resume-as-Retail-Traders-Sell_body_US_500_Client_Positioning.png)
S&P 500 Futures 4-Hour Chart
On the 4-hour chart, S&P 500 futures have cleared the midpoint of the Fibonacci retracement at 4510. That has exposed the 61.8% level at 4580 as well as a potential falling trendline from the beginning of January. A bullish crossover recently formed between the 20- and 50-period SMAs. This may hint at further gains. Clearing the 61.8% retracement as well as the potential trendline may open the door to extending gains towards the current 2022 peak at 4808. Otherwise, turning lower may see the 4212 – 4266 support zone come back into focus.
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![Equities Forecast](https://a.c-dn.net/b/32JkY8/500x707Forecast-Equities.png)
![Equities Forecast](https://a.c-dn.net/b/32JkY8/500x707Forecast-Equities.png)
![S&P 500 Futures 4-Hour Chart](https://a.c-dn.net/b/1RIS6K/Dow-Jones-SP-500-Outlook-Will-Wall-Street-Rally-Resume-as-Retail-Traders-Sell_body_Picture_7.png)
*IG Client Sentiment Charts and Positioning Data Used from February 1st Report
--- Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter