Photo - Andreas Zanin
Andreas Zanin
Analysis, Weekly Market Updates | February 5, 2024

DAX 40 & DOW JONES: weekly analysis 05th to 09th February

Market Movers

Wall Street’s major indexes reached new all-time highs, driven by optimism in the AI innovation trend and the prospect of a rate cut from the FED, despite Powell’s hawkish speeches.

This week we will have crucial macroeconomic data along with important events.

A series of data involving the services sector in China, Europe, and the United States will be published on Monday 5 February. After the Federal Reserve interest rate decision and US farm payroll data last week, this week will be much quieter for US economic releases. ISM services PMI will be the main focus for the US. Investors will be watching to see whether the dominant sector in the US economy continues in expansionary territory. Strong service sector data could support the Fed’s view that it’s still too early to start cutting rates.

On Tuesday, 6 February, the RBA is expected to release the decision for the interest rates.
Policymakers are expected to leave interest rates at the current level of 4.35%. The market will be looking for clues as to when the RBA may start to cut rates after inflation data was weaker than expected in Q4 and after retail sales plunged, highlighting the squeeze higher rates have on households.

On the same date, the Eurozone retail sales are due to be released. The data comes as interest rates in the region remain at a record high of 4%, squeezing households. Germany, the eurozone’s largest economy, posted a 1.7% drop in retail sales in December, which doesn’t bode well for the eurozone’s sales figures. Weak sales data could prompt the market to bring forward ECB rate-cut bets.

On Wednesday, 7 February, data on German industrial production and the trade balance for the US will be published. Additionally, it will be crucial to monitor the auction on the 10-year Note.

China’s consumer price index (CPI) will be released on Thursday, 8 February. Investors were watching to see whether deflation continues into the start of the new year after CPI fell -0.3% in December. China’s inflation data reflects weak demand and shows an economy that is in the doldrums. Cooler-than-expected inflation could raise further concerns over the fragile economic recovery in the world’s second-largest economy.

On the same date, the United States will release data on Initial Jobless Claims.

On Friday 9 February, we will evaluate inflation data from Germany.

Throughout the week, it will be crucial to assess the speeches from FOMC members, such as Mester and Bowman.

In the meantime, the earnings season continues. Disney will release Q1 earnings on Wednesday, 7 February. Expectations are for EPS of $1.04 on $23.79 billion in revenue. The results come as the share price is down over 9% over the past year, underperforming the broader market. Attention will be on the streaming market, particularly after Netflix’s impressive performance. Investors will also be watching to see whether the Experiences segment continues to outperform. A string of movie flops could negatively impact results.

Weekly analysis and market scenarios for DAX and Dow Jones

2024 will be very important for the markets. There are several political elections in different regions of the world, starting from the United States of America to Iran, Mexico, Portugal, the United Kingdom, and about 50 other countries. Furthermore, attention will be focused on the war in Ukraine and Israel as well as the various issues in the Middle Eastern region. The year is expected to be positive for the stock markets with 4-5 months of sideways and bearish movement. The lows for the year will likely be posted at the end of the first semester. After that, markets should rise until the end of the year, reaching annual highs in December.

What will happen from now on? We are approaching a crucial period of the year for the stock market. Furthermore, since reaching the lows on 30 October, prices have not yet experienced a retracement of more than 3%. The US indices are surging and posting new historical highs. However, statistically, a correction is anticipated between mid-February and mid-March.

From the lows of the week of 13 March 2023, the rise of the international stock exchanges has been incredible. The thesis that supported a lead to a very strong climb until August 4th, the annual setup, was confirmed with almost millimeter precision. Everything occurred as we predicted, and between September 2022 and March 2023, all international markets posted their temporary lows (which could also be the ten-year lows).

Beyond the rhetoric of the debt ceiling, the recession, and the banking crisis, only a decisive flip in sentiment could lead to a trend reversal. Earnings of US mega caps have shown off and many other companies are also ramping up the increase in revenue.

The average annual returns on international equities (World Stock Exchanges based on GDP) are around 11%. Current rates in America are more than 5%. With a projection for 10, 15, and 20 years, equity markets always beat bond markets. Therefore, we should be at the starting point of a 10-year bull market.

Rising interest rates won’t directly and inevitably lead to a recession. As long as these hikes are balanced with economic growth, there should be no danger. On the other hand, an exaggerated rate cut could drag down the markets for a long time.

The likely lows that were supposed to be posted in October 2022 will have a high probability of remaining so for many years. They could represent the lows of the entire decade. Despite a certain short-term overbought situation, the markets are unstoppable and will be like this for a long time. Here is why.

We have highlighted several times that stock prices tend to move at least 6/9 months before the economic cycle. For this reason, during the final part of 2022, the markets would have posted a significant bottom between June and October and then taken off again for the long term. The prices marked during the year had discounted the most unfavourable, geopolitical and geo-economic conditions.

During 2024, we expect an annual return of around 10 percent. The lows are likely to be posted between May and June, while peaks should be reached in December. The maximum expected upward extension for the year is 15%, and the downward slip is expected to be identical.

As always, we will confirm the annual forecast from time to time. The forecast of Wall Street for 2024 is full of uncertainty and complexity, requiring investors to be constantly vigilant and flexible in their strategies. The ability to adapt to changing market dynamics and navigate through global challenges will be crucial to success in the financial environment in the coming months.

The S&P500 managed to post new historical highs, reaching the 4997 area.

New control zone 4995-972; closing above or below this level could determine a new bullish lunge or a weekly corrective phase.

New supports in area 4958-954, 4944-4930, 4925, 4911-4901, 4896-4878. All these areas, except the last one, are easily reachable in the event of a sell-off.

Below 4867, prices could experience a substantial pullback and remain the weekly support; intermediate supports in areas 4854 and 4844-840.

Confirmed supports in area 4834-822-817 and 4807-4799.

Monthly support in the 4792-780 area. Additional support in area 4774-768 and 4759.

The movement occurred on Monday 8th created a new support area in 4743. Intermediate support in area 4725.

Support area 4707-4700 is again confirmed. Key supports in the 4680 and 4660 areas. The latter becomes the monthly area.

The 4595-4607 area is the monthly control area, closing below it could lead to a significant corrective movement.

The supports in the 4592-4582 area are confirmed, the loss of this latter zone could lead to swift corrections up to the 4562-4552 support, crucial for the ongoing upward movement.

Additional supports in area 4542-4538 and 4528-4523.

4517-4510 and 4503-4494 confirmed. The support at the 4491-4474 area is critical, and the loss of this latter area could bring steep corrections. The target is the support in the 4428 area, which is confirmed as a monthly level.

Confirmed again 4411-4409, 4397, 4390-388 and 4371-4384.

The 4363 mark is confirmed, the breaking of this important level could lead to swift corrections towards 4334-4327, 4320-4315, 4303-4292 up to 4256, which remains a key support for the ongoing rally. Additional supports in areas 4244-4223, an overbought area, 4190-4185, and 4164-4158.

Late November support at 4138-4124 became the new monthly support. 4117 and 4100 are confirmed. Losing the latter support could lead to heavy drawdowns in the medium term.

Confirmed the supports in 3930-3905-3899, 3945-3957-3961, 3979, 3993-4000, and 4032-4043 areas. The 4064-4075 areas remain a crucial support for this year too.

3890-3879 is still a critical area because, in this specific area, buyers managed to concentrate. Additional support in 3864-3857 areas. Another intermediate zone is located in the 3822-3814 area.

Support in the 3808-3798 zone was confirmed, below which prices could start a new downward
spiral.

Support confirmed in areas 3669, 3680-3689-3701, 3711-3726-3733.

3762 and 3711 are the monthly levels that support the current uptrend, so beware of any breakout of these levels: We could witness a new trend reversal.

The psychological support of 3600 remains crucial. The support at 3644-3651 has halted the fall and is now the monthly support after this solid uptrend. It shouldn’t be reached again, to avoid new and heavy downward movements. Below is the 3607 level. Then again, the 3557-3547, 3538-3524, and 3514-3507 are support levels. The 3485 support is now the annual, critical, and historical level for the S&P500 index. We will monitor whether this last level could stop, at least in the medium term, the bearish direction of the markets. Should we go beyond it, 3200-3300 will be the target, sought after by funds, investors, and traders halfway around the world.

Protecting 4867 will push prices towards new historical highs, the first target is 5000-5100 and then 5300-5500. New resistances in the 4876 area.

How to move? In recent days, a bullish phase has emerged without significant corrections. As we already mentioned, there were no apparent dangers until 6 January, but from this date onwards, a decline of one or even two months could unfold. Despite the ongoing bullish strength, the second half of February could drag some corrections as per seasonality. Furthermore, a break below the weekly supports could lead to heavy drawdowns. The recent vertical movement in prices could be reversed at any time; for example,better-than-expected macroeconomic data will be the confirmation that rates are unlikely to be reduced in the near term.


DE40 – Last week, the German index attempted to break through the weekly resistance at 16927-972, posting new historical highs around 17027. Although it managed to close on Friday with only a few pips away, this leaves room for potential further surges towards new peaks.

New supports in the 16987-969, 16953-899, and 16867-822 areas.

Key support in area 16781-748. Additional supports in the 16681-619 area are holding the ongoing price rally.

Supports 16573-533 and 16498-440 confirmed.

Support at 16416-306 confirmed which remains weekly. Only below this latter area, the Dax could begin a serious retracement.

Additional supports in the 16263-223, 16198-163, and 16132 areas. These levels are great areas to look for long entries. Below 16132 prices can accelerate strongly downwards, towards the new critical support at 16025-15958.

15918-872 is confirmed, below this level, we could observe swift downward corrections with targets at the key volumetric supports of 15679-620 and 15589-533. Additional support in areas 15422-384 and 15315-252.

15130-097-070 and 15036-15000 confirmed. Monthly support in the 14935-895 area. Other supports in the 14874-801 and 14775-730 areas. 14662 and 14625-590 confirmed.

Confirmed intermediate supports 14138-184, 14342, 14414-545.

Critical area at 13814-781. The loss of the volumetric zone 14069-13974 opens the gateway to the monthly support in the 13621 area.

Solid supports in area 13692-608, 13550-516 and 13457-410. Supports at 13314-333, 13331-410, 13438-467 are again confirmed.

Confirmed volumetric supports in areas 12865, 12833-12909, 12978-13038, 13113-178, 13222-280, 13307-357.

Confirmed the supports in area 12808-766. From 12628 to 12766, there are a series of intermediate supports, helpful for long entry from pullbacks. 12566 becomes monthly support.

Additional critical supports are 12407-517 for the concentration of volumes. 12353-275 is the first bullish turning zone. Confirmed support in areas 12223 and 12136.

It was also confirmed support in the 19920-15006 area. This is 11875-11950-12024, which halted the price fall after the US CPI data on 13 October 2022. Losing it would mean new bearish pressures and a touch of the weekly support in the 11766 area; with extensions to 11650 and 11542 below it. The 11095 mark could be a target in case of a massive sell-off. These levels can be considered annual reversal points.

The Dax has reached our annual target in the 16800-17000 area. If prices stabilize above 16974, we will aim for 17100 and then the final extension of 2023 in the 17500 area. Possible new annual targets in the 18000-18500 area.

If by the following Friday, prices remain above 16664 we could witness a chance for a continuation of a bullish movement on a monthly basis; below 16418, the trend could move firmly downwards again.


US30 – Last week, the US index broke the previous resistances located at 38103-162 and 38189-231, reaching beyond our second annual target of 38500. Then it reached 38797 on Friday.

New supports in the 38722-647 and 38494-312 areas, appear to be the accumulation zone of this upward momentum and shouldn’t be lost to continue the movement. Additional supports in area 38119-087.

38016 and 37921-861-793 remain weekly.

It was confirmed 37715-452. This broad range will withstand any bearish attempt, and only a powerful break will trigger new and substantial drawdowns.

Additional supports in the 37404, 37338 and 37303-186 area, which become weekly.

The loss of 37303-186 could lead to heavy sell-offs. Intermediate areas: 37126-034, 36927-850, 36762-657, 36617-498, 36465-342. The latter becomes monthly. All of these areas are excellent buying opportunities. Only the loss of the monthly support could open up to corrections for the medium term.

Confirmed 36094-36300, 36013-35872, 35813, 35717-570, 35459-370 and 35337-237. These are optimal levels to take into consideration for possible long re-entries in the event of a price correction.

Supports in the 35206, 35140, and 35052-34946 areas are confirmed.

34880, 34833-796, and 34717-630 confirmed which is the critical volumetric support. The loss of these supports will be due to swift corrections at targets 34383-210 and 34082-33929, which become the new monthly support.

Confirmed 33868-811, 33767-598, 33557-457 and 33384-192. Monthly support in area 33133-057. Additional supports in area 32896-792.

New monthly support in the 32771-650 area. Critical supports were confirmed in areas 32600-524 and 32393-331.

Confirmed supports are located in two overbought areas: 31197-497 and 31536-764. Additional support areas are placed at 31753-920, 32111, and 32276. The 31861 level still remains a critical one.

31036-31125 is still the critical support for the monthly level. It was confirmed 30953-815, 30715-614, 30559-381, 30253-136, and 29696-29906.

The 29485 mark remains a critical one. Beyond 29619-529 and 29338-29264, the support zones 29159-28876 and 28800-28685 are again kept. These are all excellent supports to look for long entry opportunities from pullbacks. Should they all be pierced to the downside, prices could move toward 28319, 28051, 27765, and 27019 in extension.

At 35620, the gap of Tuesday 2 August 2022 will be filled. Final resistance in the 35673-715 area.

New resistances in the 381764 mark. Above the latter mark, prices will seek intermediate targets in the 3900 -39300 zone. New annual targets 40000-42000.

IMPORTANT NOTE: The market witnessed new peaks in volatility, however, it failed to start the expected corrective phase which is now just postponed. Therefore, it will be crucial to monitor whether the weekly supports are maintained to determine the possibility of a bullish continuation or not during this month. Prices have not yet provided any clues in this regard, and the breaking of the local highs for the period could lead prices to new peaks before a more accurate reversal.

Also, this week, it is wise to note Monday’s openings and Friday’s closings for confirmation or denial of the current trend. Avoid overtrading and watch for volatility imparted by HFTs. Mark any gaps that may also appear during the week, with particular attention to those on Monday.

Enjoy your trading!

 

Latest Article
Improve your trading with a True ECN Broker
Trading account overview