Dow Jones, S&P 500, Fed, Retail Trader Positioning, Technical Analysis – IGCS Wall Street Update
- The Federal Reserve offered a boost to Wall Street as markets favor a pivot
- Despite gains in the Dow Jones and S&P 500, retail traders continue selling
- Is this a sign that further gains may come from Wall Street, or will things turn?
![](https://a.c-dn.net/b/0YPMDo/logo-stripe.png)
![Equities Forecast](https://a.c-dn.net/b/32JkY8/500x707Forecast-Equities.png)
![Equities Forecast](https://a.c-dn.net/b/32JkY8/500x707Forecast-Equities.png)
Wall Street rallied up a storm despite the Federal Reserve hiking rates by 75-basis points. It seems that Chair Jerome Powell’s pivot away from a focus on forward guidance seemed to do the trick. The central bank is looking to a meeting-by-meeting basis for incoming tightening, focusing on the data. In that regard, rising fears about a recession are boosting speculation of a Fed pivot next year.
Despite the rise in the Dow Jones and S&P 500, retail traders are increasingly selling into recent price gains. This can be observed by looking at IG Client Sentiment (IGCS), which tends to function as a contrarian indicator. As such, if traders continue to sell the stock market, the indicator could hint at further gains to come from Wall Street.
Dow Jones Sentiment Outlook - Bullish
The IGCS gauge shows that about 42% of retail traders are net-long the Dow Jones. Long exposure is on the decline, dropping 10.17% and 6.02% compared to yesterday and last week respectively. Since most traders are now short, this seems to suggest further gains may come from the Dow Jones.
![Dow Jones Sentiment Outlook - Bullish](https://a.c-dn.net/b/3mpmq0/Dow-Jones-SP-500-Forecast-Traders-Sell-Wall-Street-as-Fed-Hikes-Will-Stocks-Rally_body_Wall_Street_Client_Positioning.png)
Dow Jones Daily Chart
Dow Jones futures are up over 8 percent since June’s bottom, though the dominant downtrend since the beginning of this year remains intact. Recently, prices confirmed a breakout above the 50-day Simple Moving Average (SMA). That has opened the door to extending gains, placing the focus on the 100-day SMA. Taking out the latter would subsequently expose the 33169 – 33434 resistance zone.
![](https://a.c-dn.net/b/0YPMDo/logo-stripe.png)
![Top Trading Opportunities in this Quarter](https://a.c-dn.net/b/0WEWFC/500x707Forecast-TopTradingOpportunities.png)
![Top Trading Opportunities in this Quarter](https://a.c-dn.net/b/0WEWFC/500x707Forecast-TopTradingOpportunities.png)
![Dow Jones Daily Chart](https://a.c-dn.net/b/2f0wFj/Dow-Jones-SP-500-Forecast-Traders-Sell-Wall-Street-as-Fed-Hikes-Will-Stocks-Rally_body_Picture_9.png)
S&P 500 Sentiment Outlook - Bullish
The IGCS gauge shows that roughly 45% of retail traders are net-long the S&P 500. Since most investors are biased to the downside now, this suggests prices may continue rising. Short exposure has increased by 9.05% and 8.47% compared to yesterday and last week respectively. With that in mind, the combination of current sentiment and recent changes are producing a stronger bullish contrarian trading bias.
![S&P 500 Sentiment Outlook - Bullish](https://a.c-dn.net/b/173uRY/Dow-Jones-SP-500-Forecast-Traders-Sell-Wall-Street-as-Fed-Hikes-Will-Stocks-Rally_body_US_500_Client_Positioning.png)
S&P 500 Daily Chart
S&P 500 futures have also confirmed a breakout above the 50-day SMA, pushing higher over 10% since bottoming in June. Immediate resistance seems to be the 38.2% Fibonacci retracement at 4017, with the 100-day SMA above. The latter could hold as resistance, maintaining the broader downside focus. Otherwise, extending gains places the focus on early June highs for resistance down the road.
![](https://a.c-dn.net/b/0YPMDo/logo-stripe.png)
![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)
![S&P 500 Daily Chart](https://a.c-dn.net/b/2Mski1/Dow-Jones-SP-500-Forecast-Traders-Sell-Wall-Street-as-Fed-Hikes-Will-Stocks-Rally_body_Picture_8.png)
*IG Client Sentiment Charts and Positioning Data Used from July 27th Report
--- Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter