DAX30 & DOW JONES: weekly analysis 05 – 09 JUL
Market movers
The stock market closed last week consistently bullish. The Non-Farm Payrolls report indicated that the US economy added 850,000 jobs in June compared to analysts’ consensus of 700,000. The previous report was revised from 559,000 to 583,000.
The unemployment rate unexpectedly rose from 5.8% in May to 5.9% in June while analysts were expecting it to diminish nearer to 5.7%.
On Friday, U.S. indices closed with a strong rally as investors ignored the risks of higher rates (as wages are falling) and preferred to focus on the robust rebound in the U.S. economy.
The holiday of the 4th of July helped to keep good directionality. However, we know that the focus of the traders will determine the trend. This is also confirmed by the macro data and the Fed statements. On July 13th, consumer inflation data we will show how the markets will react to an eventual inflation rebound.
This week will start with reduced volumes due to the closure of the U.S. financial markets for the celebration of Independence Day (July 4th which falls on a Sunday and is also celebrated the following day). The most interesting macro data will be the ZEW index in Germany and the minutes of the last FOMC meeting. The meeting of the Reserve Bank of Australia that could review its monetary strategies will also be of particular interest.
Analysis of the week and scenarios for DAX and Dow Jones
Wall Street continues to run high. Statistically, the month of July has a high probability (around 75%) of leading to positive returns and, at the moment based on the latest data available, there are still no dangers on the horizon for the stock markets. We expect weekly minimums on Monday or Tuesday with the possibility of viewing highs on Friday.
Volatility is low as well as volumes which are barely present. This is an ultra-relaxed scenario, but as always, it’s a good practice to monitor intraday moves so that the current trend is clear and we can prepare for weekly changes.
DE30 – At the beginning of the week the Dax made an attempt to break 15,755 attempting to lead towards new all-time highs but without success. The rest of the week, after a quick touch of the weekly support 15,464, price oscillated between it and the resistance area already indicated last week 15,661-15,707.
The German index will need to stay above 15,661-15,707 in order to approach the final resistance of 15,755 and then start a path towards new all-time highs. The first target for the year is around the 15.900 area but the real goal might be the 16,000-16,200 area. Price will have to hold the 15,755 area in order to continue upward.
We can see Intermediate supports in the 15,530-15,580 region. Below them, we would watch for support at 15,464 which maintains the current weekly bullish trend. Below 15,464, we do not have any relevant support until the 15,386-15,311-15,269 area. Key area for keeping bullish strength is confirmed at 15,209. All these levels might be optimal buying points.
Supports in the area 15,119-15,062-15,043 are still weak after the rise of mid-May. Below them, a vertical fall would be interpreted as a probable new downtrend. We always watch for the volumetric supports at 15,017-14,981 and 14,842-14,804. The loss of these last two areas opens to new lows with first targets around area 14,600-14,441.
US30 – The Dow Jones closed the week on a sharp rise approaching its historical highs in the 35,000 points area. We feel this is mainly due to the low volumes and the 4th of July.
At the beginning of the week price remained within the intermediate resistance indicated last week (34,395-34,570) before breaking through it on Thursday’s session and closing the week around the final resistance (34,717-34,846). Above this level, we will not only return to the 35,000 points but also aspire to new highs stretching to 35,500-36,000 points.
Weekly supports can be found at 34,570-34,395 and these should not be missed to maintain the current bullish trend. Key support is seen at 34,307 as it was touched several times without getting continuity in the price fall. Next support could be at 34,134-34,015.
The support between 33,980 and 33,823 is confirmed. This area corresponds to the resistance from two weeks ago and we have seen lots of bites (buys). However, only with a significant increase in volatility and continuous vertical falls of the price, will it be possible to see a change of the trend. This is related to the selling climax of mid-June where the purchases clearly marked the trend.
Some important bearish signals might come if price goes below 33,686. Key level is seen at 33,608. The following support could be at 33,215 and confirmed at 32,956. The latter should be monitored as its loss could lead to fast and new bearish pressures.
Interesting buying levels can be seen at 32,761-32,638 and 32,308. The strong buying zone created weeks ago at 32,308-32,137 is confirmed. Only below it can we see stronger bearish pressures with possible weekly trend changes.
The old resistance zones could also be bearish targets below 32,137; 31,741-31,986 and 31,521. These levels should be optimal for buying opportunities.
IMPORTANT NOTE: Low volumes have contributed to maintain good bullish tension. If we won’t see volatility augment enough to see declines on a multiday basis, we might continue to look for entries after prices define a minimum of the accumulation zone or a quick reversal at each pullback. The target of the S&P500 index is to look for 4,400 where we should expect major reversals on all indices.
Also this week, it is wise to take note of Monday’s open and Friday’s close in order to confirm or deny the current trend. Avoid overtrading and pay attention to the volatility caused by HFT. Mark any gaps that may appear during the week with particular attention to Monday.
Have a good trading week!
Research provided by Giancarlo Prisco
The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.
Before making any investment decisions, you should know that:
– Key to Markets publishes analysis of any kind solely for information purposes and such analysis should not be construed as investment advice or a solicitation to buy or sell any financial instruments including without limitation CFDs.
– Key to Markets will not be liable for any loss or damage, which may arise, directly or indirectly from use of or reliance on the data provided by Key to Markets.
– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.
– Past performance is not a guarantee of future results.
Before making any investment decisions you should understand how leveraged products work as they are speculative in nature and may result in profit and losses. Please, before starting to trade, you should make sure that you understand all the risk
