Market movers
The downward pressure on the markets continues.
Some of the catalysts that encourage sellers to reduce their stock positions are: the increase in coronavirus cases, the inability of politicians to accept a new round of fiscal stimulus and uncertainty regarding the presidential elections on November 3.
It should be noted that these declines are part of the US pre-election cases, where we usually find ourselves in a bearish market just before the elections and, immediately afterwards, we face strong rises for weeks, with the necessary exceptions, as it was for example with Obama in 2008 and Bush in 2000, which took place in the midst of two major crises.
This year the uncertainties of the elections are linked to two important events: the possibility for both candidates to challenge the vote in the event of a victory without a strong majority and the division of the Congress between Republicans and Democrats. The markets can only benefit from the election event as long as it does not last until Christmas, should one of these events occur. All that remains for us to do is to wait until November 3 next to see what concrete direction the markets can take.
Analysis of the week DAX and Dow Jones scenarios
This week the graphic situation has further deteriorated and, if nothing changes, strong bearish movements on the stock markets are expected in the coming weeks. The key will be the closing of quotations on November 6.
DE30 – The German index has gone beyond the indicated levels of support in area 12314-11840, adding up a drop of over a thousand points in a week. The loss of this level indicates maximum attention: if the DAX will not close above 12634 this week, it will not be possible to see any new rises, but only technical rebounds. This week The zone 11650-11542, if maintained, may favor some recovery movement, with possible target in area 12109. Here we will verify the possibility of a price return on a more stable area, 12314. On the contrary, if prices will remain below 11542, we will expect new decreases. First targets 11214-11095 and from here possible to 10766-10480, last touched on May 15.
US30 – In Friday’s session the Dow Jones lost more than 500 points, closing the week with a loss of about 6.4%, a value not seen since March. If this week the index will be able to stay above 26110, we will have presence of buyers. However, it is good to remember that we will see only technical rebounds, even if we do not go above the resistance area 26650. A weekly opening above this level could bring the quotations back to area 27019. Overtaking this level could trigger an upward acceleration with 27625-716 as the next upward target. An important game will be played here, because maintaining this area can open the way for new and strong rises, even beyond the October highs. The indicated levels are important resistances and should be taken into account for new downward reversals. Sellers will come back strongly if level 26110 is brought down. The decline will extend to the main low of July 30 at 25777. This is a potential trigger point for a new downward acceleration with three potential targets below 25399, 25149 and 24680. Annual support is very important at 24309.
Research provided by Giancarlo Prisco
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