Market movers
It is very likely that within 3 weeks the distribution of vaccines against Covid19 will begin. The key date seems to be December 12th. Therefore, the stock markets are already rushing to price a return to normality in about six months, the estimated time for distribution and a first large-scale immunization.
The rotation process in favour of value stocks could bring the weight of tech stocks back to a value similar to that of the beginning of the year. The market has already partly positioned itself and will probably wait for other elements before continuing the rotation. These will certainly include the FED meeting in December and the announcement of the first injection of the vaccine. In addition, in these three weeks, the multi-asset funds will be called to make a very important rebalancing. If there will be a Christmas rally, it may not be as strong as we might imagine.
During the Thanksgiving week, low volatility helped the markets continue to maintain their bullish strength.
The month of December will open with a week of dense macro data. In addition to Friday’s US non-farm payrolls, which will provide an overview of the US employment situation in the month of covid-19 at all-time highs, it will also be the week of the directors’ purchasing indices in November, the manufacturing sector, the PMI index on services in Europe and preliminary inflation data for November.
Watch out also for the price of crude oil at the beginning of the week, as we will have the Opec meeting on Monday and Tuesday.
Despite the extraordinary rise in the last month (some indices performed by more than 20%), there are no major dangers on the stock markets. The excesses are discharged with intraday retracements immediately recovered. Any technical adjustments should be seen as an understanding of the current trend.
DE30 – The DAX continues to maintain a strong bullish strength despite the US indices having worked half service all week. The 13,250 level highlighted last week has been broken. On Friday, the price started its way to our target in area 13,411-497, a level which may be reached in the coming days. Extensions towards the last resistance in February in area 13,650-750 are possible. From there on, we may see 14,000 points in a short time.
The German index marked an important support area around 13,104-13,090 this week. This is the area that can open to dangerous descents on a weekly basis. We also remember the 13,020; a strong break in the area could offer us a strong correction down to 12,723-635. This is the monthly support zone; a heavy breaking of the 12,500 points level would open the door to further falls.
Key supports at 12,155-12,237 and 11,766, below which we should be ready for a trend change. Lost the 11,542, the first targets are identifiable in the 11,214-11,095 zone. From here, it is possible to extend down to 10,766-10,480, last touched on May 15th.
US30 – The Dow Jones perfectly reflects cyclic rotation. The 29,169 level has been maintained since its weekly opening, allowing the price to reach new highs. The only concern could come from the intermediate resistance in area 30,098 which has been holding back the price for three weeks. However, last week’s projection in area 30,715-31,000 points is still valid, especially if the 30,098 resistance will be strongly knocked down and maintained on a daily basis.
Correction possible below the 29,618 level; however, only the losses of weekly support 28,880-29,119 could put the current trend into short term crisis. Below that, we have intermediate support 28,319-28,051. A closure below 27,762-625 would undermine the current bullish scenario.
Area 27,019-26,650 is the area not to be missed. This area has been successfully tested and has led to strong elevations. Sellers will return strongly if level 26,110 is brought down. The drop will extend to the main low of July 30th at 25,777. This is a potential trigger point for a new downward acceleration with three potential lower main targets at 25,399, 25,149 and 24,680. Annual support at 24,309 is particularly important.
IMPORTANT NOTE – The opening on Monday night and the gap that is created usually gives an indication of what the whole week will look like. Especially, if the gap that forms is continuous or is closed in the following hours with a very violent movement. This week’s macro data can offer interesting movements on an intraday basis.However, if the volatility of the VIX remains extremely low it is advisable to operate on a multiday basis to capture the weekly trend
Research provided by Giancarlo Prisco
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