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Andreas Zanin
Analysis | March 30, 2021

DAX30 & DOW JONES: weekly analysis 29 MAR – 02 APR

Market movers

This Friday saw an impressive rally in the US market, led by the benchmark S&P500 index and the blue-chip Dow Jones Industrial Average. The broad rally was fuelled by strong performances in technology, healthcare, and financials stocks. Contributing to the upward momentum were growing bets on a recovery that should lead to the fastest economic growth since 1984.

Biden’s statements on the vaccination campaign and the Fed’s decision to allow banks to resume paying dividends from June also helped.

In recent weeks, oil has lost momentum due to less rosy forecasts for aggregate demand, linked mainly to air traffic which, at least for the moment, is still hostage to the restrictive measures adopted by many leaders around the world.

Only in the last few hours has there been a return of interest in oil due to the blockage of traffic on the Suez Canal. For two days now, a container ship has been blocking the canal and it will take another 4-5 days of work to unblock it. In the meantime, many shipping companies are considering alternative routes, which are much more expensive. (another piece that will weigh on PPI and thus lead to inflation).

Next week will be characterised by a lot of macroeconomic data. In Europe, the spotlight is mainly on inflation figures and manufacturing PMI indices. In the US, the main data are the non-farm payrolls that will be published on Friday. In the coming week, pay attention also to US President Joe Biden’s speech in Pittsburgh on Wednesday on possible references to the $3 trillion infrastructure megaplan.

Analysis of the week and scenarios for the DAX and Dow Jones

As seen in last week’s analysis, we saw a new bullish swing on Friday, so equity markets are likely to be back on track for a new 2-3 week bullish phase. The weekly low is expected to form on Monday and then give way to an uptrend until Thursday. On Friday the indices will be closed for the Easter holidays.

DE30 – Last week the German index nicely held the 14,545-14,589 indicated in the last publication. The fast bearish movement on Thursday did not lead to any break-down of the key support 14,400. On the contrary, the bullish turn has been formidable, leading not only to the touch of 14,744, but on Friday the Dax has pierced the 14,804 and has given new all-time highs, reaching 14,856. If we keep 14,804 from now, next target 14,918 and then extend over 15,000, with extensions to 15,200 (weekly target however confirmed).

First weekly supports at 14,744 and 14,687. These areas if lost can offer fast falls to the key area created last week 14,600-14,545.

Further support levels are around 14,492-14,465 and then near 14,391. The weekly key level is placed in the 14,400 area. The loss of this level could lead to lasting declines.

The 14,301 area remains particularly important. A loss of this level together with 14,231 might trigger a quick fall to buy zones 14,144-14,096 and 14,003-13,974 seen last Monday the 8th. Conversely, if the zone 14,301-14,231 sees an upward turn, it could be the weekly low and offer excellent buying opportunities.

It’s very important for area 13,977-13,877 to hold as it is a weekly level. The key monthly support remains in the 13,821 area. As long as it is not lost, risks of further declines are likely to be denied. Otherwise, the maintenance of the support will favour bullish phases for the German index.

If the price returns below 13,750 without a quick reversal, it may target 13,650 again and from there onwards an important support in the area 13,620-13,657. If surpassed, the next downward extension may be 13,373-13,289. These areas represent excellent opportunities for long re-entries provided that US indices do not show bearish excesses and that volumes are not too high. Otherwise, shorts may be the preferred trade.

If the 13,373-13,289 area is breached, there are no obstacles until the yearly supports touched in December, 13,142 and 13,020. The possibility of a strong downward acceleration increases considerably if the price goes beyond the 13,000 points area. In this case, area 12,723-12,635 is the first relevant support and we cannot exclude the reaching it in one or two trading sessions. This area is a key support zone, a clear break to the downside of 12,500 points would open the way to further falls.

Key supports remain at 12,155-12,237 and 11,766, below these levels we should expect a trend change. After the possible loss of 11,542, the first targets are in the 11,214-11,095 area. From here, it is possible to extend down to 10,766-10,480, last touched on the 15th of May 2020.

US30 – The Dow Jones’ upward momentum, driven by financial and energy stocks, was further helped by banking stocks after the Fed opened the door to dividend payments from June. JPMorgan and Goldman Sachs rose 1.5% and 1% respectively.

Last week, the US index settled below support 32,638. This led the Dow Jones to touch the key area 32,308-32,137 on Thursday. As mentioned last week, this area should not be missed to avoid further downward pressure. The support held very well and from here on Thursday, the price not only recovered the previous 32,638, but went well above 33,000 points, ready for new highs.

If the price manages to stay above 33,078-33,023, the target of last week in the 33,427-33,741 area, passing through 33,200, is confirmed.

Buying supports at 32,761-32,638 and 32,308. The strong buying zone created three weeks ago in the 32,308-32,137 area is confirmed. Only below it we can see stronger bearish pressures, with possible weekly trend changes.

The old resistance zones of last week would be the targets below 32,137-31,741-31,986 and 31,521.

These levels may be optimal for buying opportunities.

Below area 31,234-31,181, we might see new bearish pressures. However, a break to the downside of the support 30,986-30,922 might be necessary. As we indicated, this move has led to a nice V-reversal which remains very important at the weekly level.

Below 30,986-30,922, the game is played on the support at 30,648. If that is lost, we will look for 30,476 and vital area 30,098-30,260. The loss of the latter can signal new strength in the bearish trend. If held, it could be a perfect area for new upward reversals.

The 29,618 level will continue to determine the trend of the index in the coming weeks. Below it, we could see a strong bearish movement.

We remind you that only the loss of the weekly support 28,880-29,119 could put in crisis the annual bullish trend. Below this level, we have intermediate support around 28,319-28,051. A close below 27,762-27,625 would undermine the current bullish scenario.

Area 27,019-26,650 is vital as it has been successfully tested and has led to strong bullishness. Sellers will come back strongly if the 26,110 level is broken down. The decline may extend to the main low seen on the 30th of July at 25,777. This is a potential trigger point for a new downward acceleration with three potential main lower targets at 25,399, 25,149 and 24680. Very important annual support remains at 24,309.

IMPORTANT NOTE: The U.S. market opens at the usual time on Monday, 15.30 pm. The Dax will be closed also on Holy Monday. The volatility might decrease during the Easter week, so trading outside of the openings requires caution as one should definitely avoid trading within narrow ranges.

Have a good trading week and happy Easter holidays!

 

 

Research provided by Giancarlo Prisco

The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.

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