DAX30 & DOW JONES: weekly analysis 9-13 november
Market movers
The first week of November, after an October marked by weakness, have seen a bullish rally for the main international stock markets, with U.S. listings returning to just a few points from their all-time highs.
Despite the uncertainties resulting from the outcome of the U.S. elections and the continued growth of Covid19, which is leading many countries to implement new restrictive measures with likely negative impacts on the recovery of the global economy, the markets have pushed the accelerator at a time of great disorientation. We move between these uncertainties and the certainty of new monetary policy actions by central banks and fiscal manoeuvres by governments around the world.
The rally of the past week must be seen as an activity of professional speculation that has worked well on the statistics after the US elections, where we usually see a bullish market.
Meanwhile, over the weekend, Joe Biden became the new elected president of the United States. Three days after the election, the lead in Pennsylvania has made the Democrat the new White House tenant.
Donald Trump did not acknowledge his defeat and anticipated a tough legal battle from Monday until the deadline set by the U.S. electoral system for the appointment of the new president.
If the electoral disputes were to proliferate in the coming weeks, the bullish rally could end. It is therefore good to take these catalysts into account.
Analysis of the week and scenarios for the DAX and Dow Jones
After the continuous ups and downs of the last two weeks, we have arrived at a decisive week of markets. It will be of great help to understand whether or not we will have the famous Christmas “rally”. Part of the accumulated uptrend on last week’s weakness could be sold ahead of next week, when the focus will shift from electoral themes to macro and micro themes. The indices have reached very important resistance. Either the decline will be archived or we will have a continuation of it in the coming weeks.
On the other hand, Biden’s victory and Trump’s legal action put investors in serious doubt. Let’s see what the charts say.
DE30 – This week the German index respected our scenario with the breaking of zone 11650-542, first reaching 12314 and then coming very close to the very important resistance in area 12634.
The Dax has made a rebound of 1000 points, creating a pattern of bullish reversal: the selling climax. If prices will be able to break and maintain this level, we could have a new bullish strength for the index. The goals are ambitious: 12845-13020 and then 13142. From here the index can go back to historical highs and even beyond.
At this point it will be important to verify the maintenance of the support zone 12155-12237, below which the trend can return overwhelmingly bearish.
Key support at 11766, below which new sell-offs will be expected. Lost the 11542 the first targets are identifiable in the zone 11214-11095; from here possible to extend up to 10766-10480, touched the last time on May 15.
US30 – The Dow Jones closed the week at 28380, an increase of over 6 percent. Last week we saw a possible sharp rise above 26650-27019, bringing prices over 28000 points in Friday’s session.
The main trend will change upwards if prices trade above 28880. The breakout of 29044-29119 will confirm a new bullish trend. First target in area 29618 and then attack at 30000 points.
It will be important to check the break of 28685 points at the beginning of the week. If it does not occur it is very likely that the support zone 27762-625 will break. A lower closure at this level would jeopardize the current bullish scenario.
Area 27019-26650 is the area not to be missed. This area was successfully tested at the beginning of the week and led to strong increases. Sellers will return strongly if level 26110 is brought down. The drop will extend to the main low of July 30 to 25777. This is a potential trigger point for a new downward acceleration with three potential targets below 25399, 25149 and 24680. Annual support is very important at 24309.
Research provided by Giancarlo Prisco
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