The Dow Jones and S&P 500 have been aiming lower in recent weeks, falling in-line with losses since topping at the end of last year. Recent losses have been increasingly associated with retrial traders increasing their upside exposure on Wall Street. This can be measured by using IG Client Sentiment (IGCS), which often acts as a contrarian indicator. If this trend in positioning continues, could further pain be in store for risk appetite?
Dow Jones sentiment outlook – bearish
The IGCS gauge shows that about 63% of retail traders are net-long the Dow Jones. Since the majority of traders are biased to the upside, this suggests that prices may continue falling. This is as long exposure increased by 2.63% and 66.49% compared to yesterday and last week respectively. With that in mind, these combinations are offering a stronger bearish contrarian trading bias.