Dow Jones, S&P 500 Forecast: Prices at Risk as Retail Traders Go Long Once More

Dow Jones, S&P 500, Retail Trader Positioning, Technical Analysis – IGCS Wall Street Update

• The Dow Jones and S&P 500 have been falling lately
• Retail merchants responded by boosting upside publicity
• Is {that a} warning signal that extra ache may be forward?

In latest days, Dow Jones and S&P 500 futures have been taking cautious losses. This adopted a stable US non-farm payrolls report final week and robust ISM companies knowledge on Monday. That helped increase hawkish Federal Reserve coverage expectations. Looking at IG Client Sentiment (IGCS), retail merchants have been responding by promoting equities. IGCS tends to operate as a contrarian indicator. With that in thoughts, is extra ache forward for Wall Street?

Dow Jones Sentiment Outlook – Bearish

The IGCS gauge exhibits that about 38% of retail merchants are net-long the Dow Jones. Since most merchants are nonetheless biased to the draw back, this hints prices might proceed rising. However, upside publicity has elevated by 14.39% and 22.81% in comparison with yesterday and final week, respectively. With that in thoughts, latest adjustments in positioning trace that the worth development might quickly reverse decrease.

Dow Jones Daily Chart

Dow Jones futures broke beneath the 20-day Simple Moving Average (SMA) after establishing resistance between 34246 and 34707. A confirmatory draw back shut may open the door to extending losses in the direction of the 50-day SMA. Getting there entails clearing rapid help which is the 33169 – 33434 inflection zone. Pushing again above resistance would place the concentrate on the uptrend since October, exposing highs from April.

Chart Created in Trading View

S&P 500 Sentiment Outlook – Bearish

The IGCS gauge exhibits that about 51% of retail merchants are net-long the S&P 500. Since most merchants are actually biased increased, this hints that costs might proceed falling. Upside publicity has elevated by 14.40% and 9.41% in comparison with yesterday and final week, respectively. With that in thoughts, total positioning and up to date adjustments to publicity provide a stronger bearish contrarian buying and selling bias.

S&P 500 Daily Chart

S&P 500 futures are testing the ground of a bearish Rising Wedge shortly after costs had been unable to push above falling resistance from the start of this yr. The wedge has been brewing since October and a breakout decrease may open the door to extending losses. In such an consequence, the index may revisit lows from October. Otherwise, clearing the falling trendline from January would place the concentrate on the December 1st excessive at 4110.

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from December sixth Report

— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

To contact Daniel, observe him on Twitter:@ddubrovskyFX