Last week ended with new record highs for US equity indices after they managed to weather the threat of the Federal Reserve meeting unscathed. FOMC members decided to ease investors’ fears of an interest rate hike in the coming months. With positive macro data (NFPs) and accommodative central banks, equity markets can continue to rally at least until inflation returns.
Amongst the best performing assets for the week we have plenty of choice with equity indices (particularly the Russell200) setting new records. The Ether cryptocurrency, US dollar and Japanese yen also performed well.
Among the worst-performing assets we singled out sterling, which fell against the major international currencies after its central bank decided to postpone a rise in the cost of money. Oil, aluminium, zinc and the Turkish lira also had poor weekly performances.
Next week will be less rich in macroeconomic events than the previous ones. The most important one will be the US inflation data. On Tuesday we have the German ZEW index and on Thursday the UK GDP.
The October cyclical window, led to a powerful rebound. The S&P500 made new all-time highs in the 4,712 area, after breaking down the 4,618 area, which was the area of last week’s highs. The 4,618-4,586 area is the weekly support zone. We also signal that the loss of 4,300 would represent a clear bearish signal. This week we can approach 4,900.
The indices can push up until the next meeting of the FED in mid-December and aim at a 10% rise, unless there is a sudden change in the sentiment and the trend.
The areas of the lows should be centred between Monday and Tuesday, the areas of the highs on Friday. The pullback will then be an additional buying opportunity.
DE40 – The German index pushed strongly to the upside throughout the week, without making any significant pullbacks. On the opposite, each acceleration was matched by a breakout of previous highs, with short accumulations following.
The price broke through 15,855-15,910 on Tuesday, broke through 15,975 on Thursday and closed with new all-time highs, touching the 16,100 points area. At this point we have an open door to 16,200, extension 16,500, if the price remains above 16,077.
Intermediate support for buying at 15,974, 15,849 and 15,788-15,755 area in case of further bearish pressures.
Support at 15,516-15,645 area is confirmed; 15,516-15,463 area is a monthly support. Support at 15,363 area along with 15,241 remain valid and useful for buying. Below this last area the downward pressure can return with vigor. The key support zone 15,119-15,043 is confirmed. The zone of 15,000 points remains the annual support. We are always watching 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.
If by next Friday prices will remain above 15,974-15,889, we will see a continuation of the uptrend, but the behaviour of the price in the 16,000 points area will confirm whether or not we have reached the annual maximum. Below 15,241, however, the weekly trend can turn downwards.
US30 – The start of the quarterly reports and the return of buying in the stock markets led to a powerful rebound of the Dow Jones index since mid-October.
This week, the Dow went above 36,000 points, in an almost vertical way and came close to 36,500 points at the weekly close. The prices can still push this week, looking for 37,000 points.
The first relevant support is in the area of 36,068 points. If the price remains above this level, the weekly bullish trend will not be affected.
The weekly support is in the 35848 area. 35,511-35,404 important support area. Intermediate support in 35,730 area. The 35,730 may lead to some bearish pressure, which is useful to look for previous supports in order to return with purchases.
We monitor the support in the 34,871 area, below which some bearish pressure might appear. However, the uptrend is strong and only the loss of the 34,372 area can open new bearish pressures.
The 34,015 remains a key area at the monthly level. Confirmed the support 33,980-33,725 up to the 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 weeks ago at 32,308-32,137 is confirmed. Only below it we can see stronger bearish pressures, with possible structural trend changes.
IMPORTANT NOTE: Inflation data do not seem to scare the market anymore, as the temporary nature is confirmed once again by FED President Powell. Something can only change if the data start to show a strongly bullish trend. We don’t know for sure whether this upward trend will be long-lasting; however, it is good to follow the trend because it could push on for weeks. It is necessary to continuously monitor the supports and the volatility, since the trend can see strong reversals upwards or strong accelerations downwards.
Friday’s bullish turn needs to be closely monitored, especially in Monday’s opening. If last week’s supports are maintained, we can continue looking for buying opportunities.
Also this week it is wise to note Monday’s openings and Friday’s closings, to have confirmation or denial of the current trend. Avoid overtrading and watch out for volatility imparted by HFTs. Mark any gaps that may appear during the week, with particular attention to those of Monday.
Good trading!
Research provided by Giancarlo Prisco
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