DAX30 & DOW JONES: weekly analysis 15 – 19 NOV
Market Movers
Last week’s performances from indices showed mixed results. Some European indices including the Dax reached record highs but nonetheless ended up closing below US indices from the Friday before.
Amongst the best performers worth highlighting are the appreciations seen for gold and silver. The dollar also bounces showing a strong weekly performance against all other majors following concerns over a rise in inflation. On the other hand, Euro and Swiss Franc decline along with natural gas and soy beans.
This week will not feature many macroeconomic events and announcements. However, it is worth following retail sales in China as well as PMI in order to comprehend the rate of decline of Chinese growth in response to increases in PPI. We’ll be keeping our eyes peeled for any updates on the property sector crisis (Evergrande). In the US, the most important data release will be for retail sales which will be announced on Tuesday. We’ll also see 3rd quarter GDP values for Europe.
Weekly Analysis for Dax and Dow Jones
Indices seem to have entered a transitional phase this week after weeks and weeks of rising without pausing. The S&P500 has retraced slightly from the 4,712 highs, reaching the weekly support range between 4,618-4,712. It is worth mentioning that conceding 4,300 could be a clear indication of a bearish turn. Our expectation for the week is similar to the one from last week, we may see 4,900 and that prices may keep rising.
Indices are likely to keep a bullish momentum until the FED’s next meeting in mid-December. We could see a 10% rise from now until then should sentiment stand still.
Lows for the week are expected on Monday and Tuesday whilst highs are expected towards the end of the week. Any pullbacks may therefore represent suitable buying levels.
De40 – The German index reached historical highs touching 16,128 on Friday’s session after rising gradually and locking in on just over a 100-pip range.
We’ll be monitoring 16,014; if the price remains above 16,077, targets at 16,200 and 16,500 should be feasible. Weekly support expected at 15,974.
Intermediate support for buys, especially in the case of bearish pressure, should be around 15,489 and between the 15,788-755 range.
Key support is in area 15,516-645 (monthly support level). Support in area 15,363, together with 15,241 are useful for buys. Just below this range, bearish momentum may take hold.
Another key support remains area 15,119-15,043. The 15,000 mark remains the annual support as it stands. We’ll keep monitoring volume-based support levels at 15,017-14,842 and 14,842-804. Conceding these last two areas would lead new to lows with targets set on the downside towards 14,600-14,441. On the other hand, a bounce on these levels can once again reignite another rise as witnessed by the markets last week.
Overall, if prices will still hover over the 15,974-889 level by close on Friday, we should expect another bullish phase. Price movement around the 16,000 will be the biggest indicator as to whether we’ve reached the yearly highs or not. Below 15,241, momentum should change to bearish.
US30 – The Dow Jones has dropped slightly over the course of last week following less than ideal inflation figures along with Disney’s below expectation numbers.
On Monday, the index had reached highs touching area 36,567 before retracing back to 35,921. From here on, we witnessed a bounce and a close above the weekly support 36,068.
If the price will position itself above 36,293, 37,000 may still be a possibility.
Weekly support remains in area 35,848. Range 35,511-35,404 is also a relevant support. Intermediate support remains in area 35,730. Reaching this level may bring bearish momentum.
We’ll keep a close eye on support 34,871, below this level we may see a stronger bearish movement. Overall, we stand bullish and only conceding 34,372 may open new scenarios for life below.
34,015 remains a key level to monitor. Range 33,980-33,725 and key support 33,608 are extremely relevant.
Further support levels remain steady at 33,215 and 32,308, the latter is particularly important as its loss could bring downward gaps and renewed bearish pressure.
Using support level for long entries could prove to be fruitful between 32,761 and 32,308 and around 32,308. The strong buy zone created weeks ago in area 32,308-32,137 remains a potential. Only below this range can we witness a more long-term bearish pressure.
Important: The slight retracement this week has not changed the long-term trend in our opinion and this may be the case until inflation data will be taken more seriously. The steady rise should continue until Thanksgiving and Black Friday. The scenario may only change if volatility rises substantially combined with a collective decline in indices. Until then, pullbacks may represent an opportunity to buy. As painful as it might be, we’ll continue to monitor support levels and volatility as the trend may see strong reversals and sharp declines.
Research provided by Giancarlo Prisco
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