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Dow Jones, S&P 500, AUD/USD Outlook: Retail Traders May Chase Declines

Dow Jones, S&P 500, AUD/USD, Trader Positioning – Talking Points

  • Dow Jones, S&P 500, AUD/USD may fall as long bets increase
  • What are some key technical levels to watch for in the near term?
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In this week’s webinar on IG Client Sentiment (IGCS), I discussed the outlook for the Dow Jones, S&P 500 and AUD/USD. IGCS is a contrarian indicator. For a deeper dive into what this means and for fundamental analysis, check out the recording of the session above where I also outlined the road ahead for GBP/USD starting around the 31-minute mark.

Dow Jones Sentiment Outlook – Bearish

The IGCS gauge implies that about 38% of retail traders are net long the Dow Jones. Upside exposure has increased by 1.73% and 32.15% over a daily and weekly basis respectively. Recent changes in sentiment warn that the current price trend may soon reverse lower despite the fact traders remain netshort.

Dow Jones, S&P 500, AUD/USD Outlook: Retail Traders May Chase Declines

Dow Jones Futures Technical Analysis

Dow Jones futures could be readying for the next leg lower in the near term. That is because the Dow has taken out short-term rising support from the middle of September. However, confirmation is lacking. A further close under the 28084 inflection point could open the door to testing rising support from June.

Dow Jones Futures – Daily Chart

Dow Jones, S&P 500, AUD/USD Outlook: Retail Traders May Chase Declines

Dow Jones Chart Created in Trading View

S&P 500 Sentiment Outlook – Bearish

The IGCS gauge implies that roughly 41% of retail investors are net long the S&P 500. Downside exposure has decreased by 3.19% and 16.18% over a daily and weekly basis respectively. Recent changes in sentiment warn that the current price trend may soon reverse lower despite the fact traders remain netshort.

Dow Jones, S&P 500, AUD/USD Outlook: Retail Traders May Chase Declines

S&P 500 Technical Analysis

S&P 500 futures may also be at risk to a turn lower in the near term. Recently, the S&P closed under a short-term rising trendline from the middle of September. However, confirmation of the breakout is somewhat lacking. A push through the October 19th close could open the door to testing rising support from June.

S&P 500 Futures – Daily Chart

Dow Jones, S&P 500, AUD/USD Outlook: Retail Traders May Chase Declines

S&P 500 Chart Created in Trading View

Australian Dollar Sentiment Outlook – Bearish

The IGCS gauge implies that about 58% of retail traders are net long AUD/USD. Upside exposure has increased by 8.11% and 35.77% over a daily and weekly basis respectively. The combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias.

Dow Jones, S&P 500, AUD/USD Outlook: Retail Traders May Chase Declines

Australian Dollar Technical Analysis

AUD/USD is facing its next key technical zone as it attempts to resume the top from late August. Prices confirmed a breakout under a Symmetrical Triangle earlier this month after a bearish ‘Death Cross’. This has brought the Aussie down to the 0.7015 – 0.7064 inflection zone. A close under it exposes lows from June.

AUD/USD – Daily Chart

Dow Jones, S&P 500, AUD/USD Outlook: Retail Traders May Chase Declines

Australian Dollar Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from October 21st Report

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

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