DAX40 & DOW JONES: weekly analysis 13th – 17th June
Market Movers
The sharp sell-off on Friday triggered a week of intense selling for European and US market indices. Following the European Central Bank meeting, investors in European markets mostly sold the banking sector (particularly that of nations with greater debt levels). The ECB Governing Council vowed to hike interest rates by 25 basis points at its July meeting. Still, it made no provisions to protect the Eurozone against speculative attacks once the APP plan ended. Individual reinvestments from prior programmes aren’t enough to protect countries with more significant debt levels (primarily Greece and Italy, but also Portugal, Spain and France).
According to reports, the consumer price index in the United States reached a new high not seen since December 1981. The CPI Headline increased 8.6% year over year, much above consensus predictions of 8.3%. The Federal Reserve will have to keep raising interest rates rapidly.
We’ll have a lot of macroeconomic meetings next week. First and foremost the FOMC meeting, which is the policy committee of the Federal Reserve. Many central bank meetings are scheduled, with the Bank of Japan, the Bank of England, and the Swiss National Bank among the most prominent. The yield margins between Italian/Greek and German bonds will also need to be actively examined in the coming years. Friday will also see the publication of inflation in the Eurozone. Finally, not to be forgotten are the quarterly expiries on indices and options.
Analysis of the week and scenarios for DAX and Dow Jones
The closing on Friday confirmed the significant negative pressure that began on Thursday following the ECB’s monetary policy meeting. We received proof that the market was not yet ready for the upside and that if nothing changes, markets may face a new wave of selling.
Our attention will now be drawn to the day of 5 July, when the yearly setup of the maximum projected bearish extension will be coupled. From here, we’ll see if the bulls can reclaim control of the situation for the remainder of the season. Those who follow these weekly assessments realise this might be the year’s last drop, confirming the late June-early July period as the tipping point.
After continuously attempting to reclaim our resistance level of 4168-162, the S&P500 index abandoned all bullish aspirations on Thursday, giving birth to a steep fall. Prices smashed through crucial support levels of 3991 and 3945, allowing for further bearish lunges.
Supports in the 3861 area, as well as the 3830-3822-3808 area, are maintained. If the latter level is lost, fresh reductions might occur in the regions of 3723-3808, 3694, 3628-3647, and 3576-3555. We’ll keep these in mind while deciding whether or not to make a big buy (the last one should be the maximum bearish yearly expansion).
Resistance has been put in the 4090-4116 region on a weekly basis. Only a significant break above this level might provide new positive signals. Last week’s resistance of 4168-162 still stands.
4073-4057, 4008-4019, and 3949 are intermediate resistances. These areas will have to be studied if prices touch, to check for possible long turns or new short possibilities.
The goal remains to breach the 4200 resistance area, from which prices might stretch immediately to the crucial 4285-4303 level, whose recovery will assure a weekly positive turnaround. Keep an eye out for the 4168-162 recovery, which might mark the start of an upward drive.
4313-4339, 4396, 4415-4451, and 4480 are some of the other resistances.
The resistance levels of 4506 and 4554 must be broken to reverse the slump that began in April. The 4580-4590 area must be conquered to break through the monthly obstacle set in the 4613 area.
If the weekly close above 4613 is confirmed on a monthly basis, the yearly trend will be reversed; the following objectives are 4717 and 4780.
What is the best way to move? This is the time to double-check the yearly prediction. If the present slide is confirmed, it might be the bears’ final plummet, but if the resistances described above stop any bullish attempt, we can expect another week in the red and potentially new yearly lows.
DE 40 – The German index tried several times this week to break our resistance in the 14592-545 area, but without success. The price fell vertically in the last two sessions of last week, coming very close to the key support 13690-13716.
New resistances in the area 14003 and 14209. However, the following areas are dense with volumetric walls, so it is fair to say that if 14347 and 14440 are not recovered, the bearish pressure will still be intense. So we reiterate the strength of 14592-545, the only area that would give an actual bullish signal if maintained on a weekly basis.
Instead, the remaining levels should be seen as control zones within the marked areas to have possibilities for short pullbacks.
The monthly resistance in the 14810-899 area is confirmed.
Recovery of the 15261 area first and 15380 then could offer a bullish cue up to the 15570 resistance, where we will check the possibility of a new stretch to the weekly resistance 15665.
An intermediate resistance is around the 15810 mark, and new bullish strength could be found above 15944. Finally, a break of resistance 16079-16136 would offer the possibility of seeing key resistance 16230, from which to target the 16300-16500 area.
13716 and 13523 confirmed. Key 13300 because the price has no obstacles below it until 12955, and it could rebound strongly.
Monthly support is in the 12900-12860 area. Critical support in the 12700 area, an area that proved its strength with a strong pullback and remains vital to avoid new yearly lows. Confirmed the 12500-435 area as yearly support. Extensions to 12155 and 11766.
If by next Friday prices remain above 14592, we will see a possibility of a bullish continuation; below 14003, instead, the weekly trend may continue to push.
US30 – The weight of inflation hit US indices. The Dow Jones plunged on Friday, abandoning the crucial dividing barrier 32950 and closing well below the weekly support range 31427-31701.
If prices hold above 31785, a rebound in that range might provide significant pullbacks. Up to 32712-32956, there is no significant resistance, with a 32219-288 zone acting as a stopgap. These locations should be observed if we are amid a basic shakeout, as they may provide good longs. On a weekly basis, we will consider these for probable short entries.
Our weekly attention level will be 32834. Above it, prices may assault 33100-33314, from which we may begin to move towards our resistance of 33509-779. The main aim is to go back to the levels seen at the start of May in the 34134 area, from where a more persistent reversal can start.
35157-34850, 34437, and 34237 are confirmed resistances.
Prices over 35599-963 on a monthly basis would signal a new positive directionality; 35157-34850 and 35614 are the levels where prices might revert to the upside or push back down. This requires that we keep a close eye on pricing at these levels.
If prices break through and maintain 36529, they may be able to reach the 37000 area if they break past the last barrier at 36786. Above 36236, we see the potential for more bullish volumetric thrusts.
Weekly assistance in the 31485-31785 area.
30730-30679 has been confirmed. If prices go below this level, there’s a chance we’ll see a surge up to the 29983 level, passing through 30374-30223. Extensions into the 29119 area.
IMPORTANT NOTE: As we approach the end of the quarter, the market is collapsing owing to the transition to new contracts. Keeping an eye on price behaviour will be critical towards the end of this week, as we may witness a strong comeback.
It’s also worth noting Monday’s and Friday’s openings and closings this week to confirm or disprove the existing pattern. Avoid overtrading and keep an eye out for HFT-induced volatility. Note any gaps that may develop during the week, paying particular attention to any that arise on Monday.
Enjoy your trading!
