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Dow Jones, S&P 500 remain vulnerable as retail traders increase upside exposure

01 March 2023 10:10 (UTC +04:00)

The Dow Jones and S&P 500 have been aiming cautiously lower in recent weeks, APA-Economics reports citing Dailyfix.

Retail traders have been responding by increasing their upside exposure. This can be seen by looking at IG Client Sentiment (IGCS). IGCS tends to function as a contrarian indicator. As such, if this trend in positioning continues, more pain could be in store for Wall Street.

According to IGCS, about 61% of retail traders are net-long the Dow Jones. Since most traders are net-long, this hints prices may continue falling. This is as upside exposure increased by 11.91% and 10.78% compared to yesterday and last week, respectively. With that in mind, the combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias.

According to IGCS, about 54% of retail traders are net-long the S&P 500. Since most of them hold upside exposure, this hints prices may continue falling. This is as downside exposure has decreased by 4.54% and 3.56% compared to yesterday and last week, respectively. With that in mind, the combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias.