Retail Investors Buy Dips, is that this a Warning?

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S&P 500, Dow Jones, DAX 30, Technical Analysis, Retail Trader Positioning – Talking Points

  • Retail merchants are more and more betting up key world benchmark inventory indices
  • IG Client Sentiment is warning that the S&P 500, Dow Jones, DAX 40 could fall
  • What are key technical ranges to observe for within the occasion costs breakdown extra?

Retail merchants are more and more betting the equities could rally within the close to time period, in response to IG Client Sentiment (IGCS). Upside publicity is on the rise within the S&P 500, Dow Jones and the DAX 40. At instances, IGCS can work as a contrarian indicator. If this dynamic continues, then these benchmark inventory indices threat succumbing to extra promoting stress.

S&P 500 Sentiment Outlook – Bearish

The IGCS gauge reveals that about 69% of retail merchants are net-long the S&P 500. Since most buyers at the moment are net-long, this hints costs could proceed falling. Upside publicity has elevated by 6.72% and 9.57% in comparison with yesterday and final week respectively. With that in thoughts, the mixture of present and up to date shifts in positioning are providing a bearish contrarian buying and selling bias for the S&P 500.

S&P 500 Futures Daily Chart

S&P 500 futures could also be more and more susceptible to extending losses. A bearish crossover between the 20- and 50-day Simple Moving Averages (SMAs) emerged just lately. Prices have additionally confirmed a breakout beneath the long-term 200-day SMA. Immediate assist seems to be the 4224 – 4258 inflection zone. Falling beneath exposes the June low at 4126 earlier than dealing with the May swing low at 4029. In the occasion of a flip larger, maintain an in depth eye on the near-term SMAs for key resistance factors.

S&P 500, Dow Jones, DAX 40 Outlook: Retail Investors Buy Dips, is this a Warning?

Chart Created in Trading View

Dow Jones Sentiment Outlook – Bearish

The IGCS gauge reveals that about 62% of retail merchants are net-long the Dow Jones. Since the vast majority of merchants at the moment are net-long, this hints costs could proceed falling. Upside publicity has elevated by 0.66% and 9.50% in comparison with yesterday and final week respectively. With that in thoughts, the mixture of present and up to date shifts in positioning are providing a bearish contrarian buying and selling bias for the Dow Jones.

S&P 500, Dow Jones, DAX 40 Outlook: Retail Investors Buy Dips, is this a Warning?

Dow Jones Futures Daily Chart

Dow Jones futures have prolonged losses after breaking beneath a bearish Rising Wedge chart formation. Prices have additionally confirmed a drop by means of the 200-day SMA, opening the door to a bearish technical bias. Immediate assist seems to be the 33383 – 33623 inflection zone earlier than dealing with the June low at 32902. Falling beneath the latter exposes the late March 2021 low at 31951. Pushing again above the 200-day SMA could open the door to testing the 38.2% Fibonacci retracement at 35330.

S&P 500, Dow Jones, DAX 40 Outlook: Retail Investors Buy Dips, is this a Warning?

Chart Created in Trading View

DAX 40 Sentiment Outlook – Bearish

The IGCS gauge reveals that about 66% of retail merchants are net-long the DAX 40. Since the vast majority of merchants are net-long, this means costs could proceed falling. This is as upside publicity elevated by 2.35% and 19.59% in comparison with yesterday and final week respectively. With that in thoughts, the mixture of total and up to date modifications in positioning are providing a bearish-contrarian buying and selling bias for the DAX 40.

S&P 500, Dow Jones, DAX 40 Outlook: Retail Investors Buy Dips, is this a Warning?

DAX 40 Daily Chart

Following latest losses, the DAX 40 finds itself sitting on the sting of the acquainted 14804 – 15048 inflection zone that has its beginnings from March 2021. Breaking beneath this ground could open the door to extending losses in direction of the late March low at 14422 earlier than dealing with the 14131 inflection level. Still, constructive RSI divergence does present that draw back momentum is fading. That can at instances precede a flip larger. Reversing to the upside would place the concentrate on the 16030 – 16265 resistance zone.

S&P 500, Dow Jones, DAX 40 Outlook: Retail Investors Buy Dips, is this a Warning?

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from January 25th Report

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the feedback part beneath or @ddubrovskyFX on Twitter

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