Wall Street Could Rise, Retail Traders Could Sell Lips

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

• Retail traders sell lipstick on Wall Street
• Is this a sign of Dow Jones, S&P 500 going up?
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Sentiment on Wall Street has recovered somewhat in recent days. Dow Jones futures are at their highest since mid-September. Meanwhile, S&P 500 futures are trading at his highest since late September. Fundamentally, recent weak US economic data (home prices, consumer confidence, etc.) may have cooled expectations for hawkish Federal Reserve policy.

Retail traders are eager to jump on this price move, but it probably isn’t going the way you think.Individual investors are increasing their short exposure on Wall Street, according to IG Client Sentiment (IGCS). is. IGCS tends to act as a contrarian indicator. With that in mind, could this be better news for stocks if traders continue to sell?

Dow Jones Sentiment Outlook – Bullish

The IGCS gauge shows that about 38% of retail traders are net long on the Dow Jones. With most being net shorts, this suggests that prices may continue to rise. Downside exposure increased by 7.31% and 38.43% compared to yesterday and last week respectively. With that in mind, the combination of current sentiment and recent changes offers a stronger bullish contrarian trading bias.

dow jones daily chart

Dow Jones futures confirmed a breakout above the short-term downtrend line from August. This opened the door for profit expansion. However, the prevailing downtrend line from the beginning of the year is still valid. So the broader bearish bias is still valid. Still, it may be a short-term reaction to reach this trendline. On the downside, the drop will bring focus back to his August trendline.

Charts created in Trading View

S&P 500 Sentiment Outlook – Bullish

The IGCS gauge shows that about 54% of retail traders are net long the S&P 500. Since most traders are net long, this suggests that the price may continue to fall. Downside exposure increased by 8.52% and 25.29% compared to yesterday and last week respectively. Recent sentiment shifts have warned that the S&P 500 could rise soon despite its overall positioning.

S&P 500 daily chart

In the daily setting, the S&P 500 futures rose to the 50-day Simple Moving Average (SMA). The latter may revive your downward focus. Otherwise, a confirmation of a breakout of this line will open the door to a resumption of the uptrend, exposing the September high of 4175.

Charts created in Trading View

*IG client sentiment chart and positioning data used from October 25th report

— Written by DailyFX.com Strategist Daniel Dubrovsky.

To contact Daniel, use the comments section below, or@ddubrovskyFXon Twitter