S&P 500, Dow Jones Forecast: Retail Investors Intensify Bearish Exposure, Now What?

S&P 500, Dow Jones Forecast: Retail Investors Intensify Bearish Exposure, Now What?

S&P 500, Dow Jones, Technical Analysis, Retail Trader Positioning - Talking Points

Retail investors have greatly increased downside exposure in US stock indices

But, recent shifts in S&P 500 and Dow Jones sentiment offering mixed outlook

Eyes are on the Fed and US Core PCE data this week, webinar recording above

Retail investors are once again back to their natural tendency of shorting US benchmark stock indices, as reported by IG Client Sentiment (IGCS). IGCS is typically a contrarian indicator, meaning that if traders continue selling recent trends in the S&P 500 and Dow Jones, the outlook could turn increasingly bullish. For a detailed analysis about this and how you can use IGCS, check out the recording of my webinar above.

S&P 500 Sentiment Outlook - Mixed

The IGCS gauge implies that 35% of retail traders are net-long the S&P 500. Upside exposure increased by 3.74% while decreasing by 19.80% over a daily and weekly basis respectively. We typically take a contrarian view to crowd sentiment, so the fact that investors are net-short hints that prices may keep rising. However, recent shifts in sentiment offers a mixed S&P 500 trading bias.

Technical Analysis

S&P 500 futures are testing the key 4416 – 4383 resistance zone as the index remains committed to a dominant uptrend since last year’s bottom. Negative RSI divergence does warn that upside momentum is fading, which can at times precede a turn lower. Such an outcome may place the focus on the 50- and 100-day Simple Moving Averages (SMAs). These could reinstate an upside focus as key support points. Clearing resistance exposes the 78.6% Fibonacci extension at 4486.

S&P 500 Futures Daily Chart

Chart Created in Trading View

Dow Jones Sentiment Outlook - Mixed

The IGCS gauge implies that about 28% of retail traders are net-long the Dow Jones. Downside exposure decreased by 10.93% while increasing 3.0% over a daily and weekly basis respectively. We typically take a contrarian view to crowd sentiment. With most traders being net-short, the Dow may continue rising. However, recent shifts in sentiment offer a mixed trading bias.

Technical Analysis

Dow Jones futures have left behind a bearish Hanging Man candlestick pattern on the daily chart. Given downside follow-through, this could precede a turn lower amid negative RSI divergence. This is as prices are once again testing the 35000 – 34760 resistance zone. A drop would likely place the focus on the 50- and 100-day SMAs which may reinstate the dominant upside focus. Resuming the dominant uptrend exposes the 61.8% Fibonacci extension at 35675.

Dow Jones Futures Daily Chart

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from July 28th Report

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

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

Bitcoin’s key momentum metric hints at bullish divergence as BTC clings to $33K

A recent run-down in the Bitcoin (BTC) market faces the prospects of exhaustion before confirming a full-fledged bearish breakdown, so reflects a classic momentum-based oscillator.

RSI forming higher lows

Dubbed as Relative Strength Index, or RSI, the indicator measures the speed as well as change of directional price movements. It operates within a set range of numbers—between 0 and 100. The close is RSI to 0, the weaker is the price momentum. Conversely, an RSI reading near 100 reflects a period of strong momentum.

The range also helps determine an asset’s buying and selling opportunity. In detail, an RSI reading below 30 means the asset is oversold, thus an attractive buy. Meanwhile, RSI above 70 shows an overbought asset, meaning its holders would eventually sell it to secure profits.

The RSI also enables traders to spot buying/selling opportunities based on divergences between the price and the momentum. For example, when price makes a new low but RSI makes a higher low, then it is considered a buying signal—a bullish divergence. Conversely, a Bearish RSI Divergence appears when price makes a new high but RSI makes a lower high.

So it appears, Bitcoin is confirming a bullish divergence.

Independent market analyst CryptoBirb spotted the price-momentum deviation on Bitcoin’s one-day chart. In there, the pseudonymous entity noted BTC/USD forming a sequence of lower lows around the same period its RSI climbed while forming higher lows.

Bitcoin price dips against a rising RSI. Source: TradingView.com, CryptoBirb

The statement appeared as the BTC/USD exchange rate corrected lower after forming a local top at $36,675 on June 29. However, as of the Friday London session, the pair was trading below $33,000. The RSI fell in tandem with the latest downside move and was near 42 at press time, a neutral-to-bullish area.

Numerous headwinds for Bitcoin

Downside sentiment in the Bitcoin market persisted due to a flurry of pessimistic events. That included a global crypto crackdown that started with a ban in China in May and spread to the UK, India, South Africa, and the United States.

For instance, the Financial Conduct Authority banned the world’s leading crypto exchange Binance from undertaking regulated activities in the U.K. Additionally, in India, Enforcement Directorate issued a show-cause notice to Binance’s subsidiary exchange, WazirX, for facilitating money laundering.

More headwinds appeared from hints of hawkishness from the Federal Reserve. The U.S. central bank surprised Bitcoin investors with its sudden intention to control inflationary pressures with eventual interest rate hikes in 2023. BTC/USD dropped by more than 28% after the Fed’s big reveal but later recovered after finding credible support near $30,000.

Nonetheless, bulls kept failing at sustaining Bitcoin price uptrends above the $40,000-level. As a result, the cryptocurrency remains stuck inside the $30K-$40K range, showing no clear directional bias in the short term.

Bitcoin anticipates to retest its prevailing channel’s support trendline following recent pullback. Source: TradingView.com

Konstantin Anissimov, executive director at CEX.IO, also noted that accredited investors have started maintaining distance from Bitcoin over its concerning environmental impacts. He added that mainstream interest in the cryptocurrency will return once miners switch to alternative sustainable energy options.

“When the environmental concerns are no longer a worry, many institutional investors are likely to trust the digital currency again, and as such buy more,” Anissimov told Cointelegraph, adding:

Bitcoin has a near-term projection of $50,000 and a longer-term projection of $75,000.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Gamestop (GME) Stock Price and Forecast: GME down but not out, eyes weekly gain

GME ended Wednesday in the red at $185.81, down roughly 3%.

GameStop has signalled something bullish by being green in a sea of red on Monday.

GME and meme stocks roar on Tuesday as risk is back on.

Update July 22: Gamestop GME snapped a two-day uptrend and fell 2.81% on Wednesday, corrective from weekly highs of $195.41. GME stock failed to take advantage of the upbeat risk tone, as it settled the day at $185.81. Acceptance above the $200 mark is critical to sustaining the recent recovery. However, with new meme stocks in town, investors are shifting their focus from GME and AMC. Despite the pullback, the shares are on track to book the first weekly gain in seven weeks.

Monday was a pretty good day for the original meme stock – GameStop. What was a pretty bad day for markets saw GME shares buck the trend with a gain of 2.6% to close up at $173.49. Any stock that closes up when the S&P was down 1.6% deserves a closer look. When that stock is the eponymous GameStop, then we need to see what is going on. On Monday FXStreet proposed that it might be time to consider a long position in GameStop, but we did not think it was that imminent. Now though some factors may merit taking a long position but using risk control measures as GME is not to be trifled with.

GameStop key statistics

Market Cap $12.1 billion Enterprise Value $11.4 billion Price/Earnings (P/E) -123 Price/Book 24 Price/Sales 2 Gross Margin 24% Net Margin -2% EBITDA -$112 billion Average Wall Street rating and price target Sell $88.33

GameStop (GME) stock forecast

Monday’s move can be seen as a catalyst to consider in more detail the long argument made yesterday here at FXStreet. The preference still remains to buy a dip near the $136 support, which is the May 11 low. But we may be seeing some bounce ahead of that.

Three reasons why the risk reward is now favouring further gains on Tuesday:

1. Monday’s outperformance, up in a weak day overall for equity markets.

2. Both the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) have bounced from lows in line with price action, a confirmation of sorts.

3. The volume profile in this admittedly wide zone from $140 to $180 is high, meaning the price is more likely to find support here.

Caution is as ever needed when dealing with meme stocks and in particular the king of them all, GME. To confirm, the very short-term turnaround from Monday’s high at $179 needs to be broken, and this would then see GME trade above the 9-day moving average. The Moving Average Convergence Divergence (MACD) is still crossed into bearish territory, meaning caution is needed. Look for this to crossover for further bullish momentum.

Previous updates

Update market close July 21: Gamestop GME was unable to extend gains despite a better market mood pushing stocks higher, and closed the day down 2.99% at $185.81. Demand for GameStop cooled as investors looked out for more solid investments, although it holds on to the positive ground on a weekly basis. A break through the psychological 200.00 mark is critical at this point.

Previous update: The bullishness is continuing in the first half-hour of trade on Wednesday but only just about. GME is just in the green with a modest start to the session. The MACD mentioned below still has yet to crossover and GME is stalling at the 21-day moving average. Volume lightens up above $200 meaning a break could accelerate.

Previous update: FXStreet had turned cautiously bullish on GME on Monday based on the outperformance, and Tuesday rewarded us with a 10% gain. In the process, GME stock has traded back to the short-term moving averages. Now it has moved out of the consolidation zone and back into an area of light volume, so further gains could be easier. The first target is the 9 and 21-day moving averages. Look for the Moving Average Convergence Divergence (MACD) indicator to cross into bullishness for further momentum to the move.