Market movers
The New Year’s week saw a continuation of the previous week’s bullish movement, albeit with a slightly bearish close.
Investors have made some profit taking, so we will see if the market offers new bearish cues in the coming days.
This week will be full of macroeconomic appointments. In Germany, we will see the release of the manufacturing purchasing managers on Monday and the change in unemployment on the following day. China will do the same on Tuesday as well as the U.S. will publish ISM data. The most important data will be Friday’s non-farm payrolls and the U.S. unemployment rate.
Analysis of the week and scenarios for DAX and Dow Jones
Last Friday’s close tells us that the indices saw a slight pullback that will have to be followed very closely. The dangers of new declines have been removed and therefore we might see new strong uptrends.
The S&P500 index saw new all-time highs, reaching 4,800. The break-down of the resistance 4,713-4,748 on Monday led to the annual target. Friday’s close saw the beginning of a correction.
The intermediate support is located in the 4,715-4,697 area. Weekly support is in the 4,675-4,641 area.
Vital is the 4,605-4,577-4,550 area. Only below it, we will see the bearish forces regain the upper hand. We mark the intermediate support 4,675-4,641.
It will be important to see how the price behaves if it touches the 4,429-4,474 area, the loss of which opens up more extensive bearish scenarios. We remember that the loss of 4,300 would represent a clear reversal signal.
How to move? Usually the first week of the year is positive for the stock markets and therefore we do not see particular dangers in the short term. Often, however, around the date of January 6 tend to form minimum/maximum relative and then leave a directional phase until the first ten days of March at least.
For this week we expect again a bearish phase between Monday and Tuesday and highs on Friday.
DE40 – The German index saw a new high on Monday and Tuesday, then retraced to Thursday (Friday New Year’s Eve close).
The Dax broke the resistance 15,753-15,822, breaking down 15,875 and retracing back to the previous resistance now support.
A recovery of 15,944 will offer an important bullish signal, otherwise we might see corrective moments on those levels. Seeing first 16,014 and then 16,174 will offer a new bullish trend. The Dax reached around 16,300 last year, but the target of 16,500 is still possible.
15,753-15,822 is an intermediate support, while the key support is in the area of 15,627-15,578.
15,402-15,464 is a weekly bullish support. The key area is located in the 15,332-15,227 area, which maintains the current bullish strength of the DAX. Intermediate support in the 15,606-15,645 area.
Monthly support 15,119-15,043. The 15,000 points area remains of vital importance. We always watch the volumetric supports 15,017-14,981 and 14,842-14,804. The loss of these last two areas opens to new lows, with the first target in the 14,600-14,441 area. Vice versa a rebound on these supports can start a process of reversal to the upside, as already happened last week. Extensions in the area 14,231-13,974.
If by next Friday the prices remain above 15,627, we will see a possibility of a bullish continuation; however, the behaviour of the price in the 16,000 points area will confirm whether or not we could see new historical highs. Below 15,227, on the other hand, the weekly trend may return to the downside.
US30 – The Dow Jones saw new all-time highs last week, touching the 36,700 area. The average blue chip rise is about 19% year-on-year, putting it on pace for its third consecutive annual increase. Home Depot and Microsoft led the Dow’s gains, rising more than 50% each.
A move through 36541 and holding that level will offer a chance to see the 37,000 area. Above 36,293 we keep the possibility of further bullish volumetric pushes.
On the downside, the loss of 36,293 will have as a target area 36,068, below which prices could go to seek the support of the bullish start of December 21, or area 35,511-35,588-35,686. It will be very important to follow the price behaviour below 36,000 points.
If the prices go below 35,511-35,599, the Dow can return to test the break-down zone of 35,152- 34,985 and then the monthly support zone 34,701-34,755. Only below the latter the trend can really turn down.
The 34,015 remains a key area at the monthly level. Confirmed support 33,980-33,725 up to key support 33,608.
Next support at 33,215 and confirmed 32,956. The latter should be monitored as a loss there could lead to fast and new bearish pressures.
Buying supports at 32,761-32,638 and 32,308. The strong buying zone created months ago at 32,308-32,137 is confirmed. Only below it we can witness stronger bearish pressures, with possible structural trend changes.
IMPORTANT NOTE: We are at the beginning of the year and the markets maintain the bullish seasonality, following the Christmas rally. The first week of the year can lead to highly volatile movements due to low liquidity. It is good, therefore, to follow the trend but also to keep an eye on the supports and the weekly close, because a reversal can come at any time.
Also this week and’ wise to note the openings of Monday’ and the closings of Friday, in order to have confirmation or denial of the trend in course. Avoid overtrading and keep an eye on the volatility imparted by HFTs. Mark any gaps that may appear during the week, with particular attention to those on Monday.
Happy trading and Happy New Year!
Research provided by Giancarlo Prisco
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