Last week we recorded new all-time highs for some indices, however the US Non-Farm Payrolls data released on Friday brought some pressure on them. It was particularly disappointing with only 235k new jobs in August against expectations of 750k. Powell had stated that the labour market had improved more than expected, but the expected target is still far off. This confirms the low likelihood of tapering or a rate hike (for now), as the macroeconomic recovery is still far away.
We will now have to assess the Fed’s moves at its meeting on 22 September which, through the publication of macroeconomic projections on inflation, GDP and unemployment and the dot plot graph, could give indications on the timing of the reduction in monetary stimuli to be carried out no earlier than the end of the year. Insiders next week look ahead to the ECB meeting with the rate decision on Thursday 9th (inflation at 3 percent), the third Eurozone data read of the Q2 GDP and the September ZEW index.
Sometimes macroeconomic data causes prices to soar, other times, they fall back. What matters at the moment is the risk premium in favour of equities and as long as this state lasts, prices will continue to rise. For the time being, the market rally is not in danger and can continue.
The S&P500 remains above 4,500 points; the trend is solid and only below 4,467 the trend might see a weekly correction. However, be mindful of any increase in volatility and volumetric increase, because the month of September has possibilities for strong corrections.
Friday’s close will be key. If we do not see strong sell-offs with large daily hikes, the corrective scenario will be negated once again. Pay close attention to the size of the retracement in the first few days of the week, should that happen. Barring any changes, we expect, again, a weekly close with further all-time highs.
DE30 – After a bullish attempt last Monday, the Dax did not manage to break through the resistance 15,944-15,975; between Tuesday and Wednesday the index, after a quick fall, tried again to break through the resistance, without success. Confirmed in the middle of the week a change of trend, which led the price to see, on Friday’s close, the very important support 15,690-15,717.
Although the 15,975-15,690 range held, Friday’s high volatility is a prelude to important movements this week. Only a convincing recovery of 15,885 will offer bullish relaxation and only above 15,975 we will have the possibility of new historical highs. Here it will be necessary to verify the strength of the rise, otherwise we could see new declines. Above 15,975 we see a possible target at 16,014 and then 16,200, in extension 16,500.
We recommend to monitor the resistance 15,824-15,855. If the Dax will be positioned below 15,690 and then 15,631, we will go directly to the key support in the area 15,501-15,545, below which the trend can start a new bearish path.
The support zone in the 15,423-15,400 area remains key. Below it we remind the 15,332, 15,216-15,176 and 15,119-15,071-15,043. All these levels are optimal buying entry points.
Below 15,043 points a vertical fall would be interpreted as a probable new downtrend. We always watch the volumetric supports 15,017-14,981 and 14,842-14,804. The loss of these last two areas opens up new lows, with the first target in the 14,600-14,441 area.
US30 – The US index, despite the non-farm payrolls, remained trapped in the range marked last week 35,513-35,255. Any attempt to break out, either upwards or downwards, was in vain. Above 35,513, the price will look for 35,600 and then 36,000 points, which are new all-time highs.
If the price does not manage to stay above the weekly support or to break above 35,513, we will have bearish indications and the possibility of decreasing highs on a weekly basis. Although 35,056-35,152 is a good support, the key area is from 34,701 to 34,889. This is where a lot of volume has been concentrated.
The bullish reversal of six weeks ago was very sharp. From 34,535 onwards we have a lot of support up to the zone of 33,980-33,725, given the very high amount of buying of value stocks by investors. We signal the 34,295-34,267 area and the same 33,980-33,725 for buying opportunities, the latter key support for the medium-term uptrend.
Some important bearish signals might come if the price goes below 33,686. Key level is seen at 33,608. Following support at 33,215 and confirmed 32,956. The latter should be monitored as its loss 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 weekly trend changes.
IMPORTANT NOTE: After the Non-farm payrolls, the index prices have seen a correction. It is good to keep an eye on the supports and volatility, as the trend can change at any time. As we said last week, we are in a very weak situation and any buying should be avoided if the falls are of high intensity or if we do not have solid supports. Friday’s bearish turn should be closely monitored, especially in Monday’s opening.
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. To mark eventual gaps that can appear also during the week, with particular attention to those of Monday. If any falls at the beginning of the week are quickly recovered, there will be no problems in the uptrend. Conversely, favour shorts.
Good trading!
Research provided by Giancarlo Prisco
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