DAX40 & DOW JONES: weekly analysis 20th – 24th June

Market Movers

The equity markets had a rough week as central bank interest rate hikes accelerated and quarterly technical deadlines loomed. The Federal Reserve opted to raise the cost of money by 75 basis points, with another 75 basis points possible at its July meeting. The ECB, on the other hand, was ambiguous in its approach to protecting nations with the most significant debt levels. The Frankfurt institution’s committees are developing a new capability that will allow it to intervene if speculators target vulnerable countries’ bonds (such as Spain’s).

The following week will be much less eventful. Investors will be looking for further information from ECB specialists on the way to protect the Eurozone’s financial stability. Traders will strive to grasp the events and repercussions of Gazprom’s intention to reduce gas supplies to Western Europe drastically. Following the PMI index, subsidy applications and the Michigan consumer confidence index in the United States will be essential on Thursday and Friday.

Analysis of the week and scenarios for DAX and Dow Jones

The Fed and technical expiries drove the price decline on Friday’s close, confirming ongoing intense bearish pressure. The equities markets’ negative structure hasn’t changed, and the prospects of fresh yearly lows remain high.

Our attention will be drawn to the 5th of July, which marks the annual setting of the maximum projected bearish extension. From here, we’ll see if the bulls can reclaim control of the situation for the rest of the year. Those who follow me know that, in my opinion, this could be the year’s final downturn, confirming the late June-early July time frame as the turning point.

If equity markets do not turn around by the 5th of July, this downward trend might continue with grave consequences until October of this year and then until March of 2023. In the best-case scenario, we should increase our existing levels by 20%. (for the S&P500 index, this means seeing the 3200-2800 area).

The S&P500 index lost support near 3861 and had a distribution until Wednesday evening when prices rallied during the Federal Reserve meeting. As a result, the market met three of four crucial annual support targets (3723-3808, 3694, 3628-3647). The first two provided excellent intraday pullbacks, while the third ended the price decline.

If new collapses occur, we’ll add 3485 to 3576-3555 to see if the latter two levels will halt the market’s bearish trend, at least in the medium term. If we go any further, the target will be 3200, which will be sought by funds, investors, and traders worldwide.

For the rest of the week, we’ll keep an eye on prices in the 3676 and 3647 ranges, which might lead to new rebounds or, if breached, new yearly lows.

On the upside, keep an eye on resistance 3693-3702 and, in particular, 3712, which, if broken, could result in a 100-point acceleration. The decline following the FED meeting happened too quickly, leaving a lot of space open and uncovered by volume. A concrete aim above 3712 might be a return to the 3823-3838 area, going through intermediate resistances 3743, 3753-3760, 3780-3792, and 3805-3815 on the way. These areas should be kept an eye on since they could provide fantastic selling chances if new bearish pressure emerges.

Weekly resistances are between 3823 and 3838.

The resistance above last Monday’s gap down in the 3899-3934 area is confirmed. A recovery of this area with gap closure on a weekly basis would offer a powerful recovery signal.

Prices would be unimpeded up to our resistance 4090-4116. Resistance 4168-162 remains.

Intermediate resistances are around 4073-4057, 4008-4019 and 3949. 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? The moment of verification of the annual forecast continues. A rebound attempt and the maximum formation between Monday and Tuesday is likely, and then a decline until Friday. If prices can recover higher resistances by Wednesday, the possibility of self-modifying the weekly scenario should be considered. On the contrary, another week in heavy red and, possibly, new annual lows are expected.

DE40– Last week, the German index opened with a gap down, below the crucial support of 13690-13716, before breaking through 13300 and rising to 12955, where it returned as expected and closed the week at 13152.

To recover, the Dax must demonstrate significant strength. Prices stayed within two key zones established in the last days of last week’s fall. The 13260-13160-13061 range must not lead to additional drops, or the German index may reach new yearly lows. Levels around 13117 and 13214 are the ones to pay attention to. There could be possibilities for a substantial comeback if prices stay above them.

Markets will seek monthly support in the 12900-12860 range below 13061. The 12700 region is critical for avoiding new annual lows after proving its strength with a strong pullback. The 12500-435 region has been confirmed as yearly support. Extensions to 12155 and 11766 are available.

Strong rebounds are likely above 13260. Intermediate resistances area can be found between 13373 and 13475. Prices could both rocket upwards and return downwards at this point.

The 13556 region is the weekly key level. From here, it could lead to a stretch on last Monday’s gap area, with the resistance peak around 13721.

The resistance area 13762-13842 is confirmed. Only above it there will be chances to see more lasting recoveries.

Subsequent resistances in the area 14003 and 14209. The following areas are dense with volume walls, so it is fair to say that if 14347 and 14440 are not recovered, the bearish pressure will still be intense. It is crucial then to reiterate the strength of 14592-545, the only area that could give an actual bullish signal if maintained on a weekly basis.

Instead, the remaining levels should be seen as control areas within the marked areas to have short pullbacks possibly.

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.

If by next Friday prices remain above 13721, we will see a chance for a bullish recovery; below 13556, on the other hand, the weekly trend may continue to push forcefully downwards.

US30 – The Fed gave another blow to the US stock market, which collapsed. The Dow Jones Industrial Average isn’t far behind, having dropped almost 1000 points last week.

Monday’s gap down resulted in a fast breakout of 31536, sending prices down to 30730-30679 and kicking off a ferocious downward fall on Thursday. On Friday, the index dipped below our support level of 29983 before rebounding and closing near 29904.

Any attempt at a rebound will be short-lived unless prices return above 30224. Prices have formed a strong support region around 30024; in general, if the market doesn’t lose 29823, there won’t probably be any new lows, so the range 30224-29823 might lead to a substantial increase but still within a restricted range.

If the price falls below 29823, there is a probability of new lows; if it falls below 29618, the price may extend to 29119; if it falls below this level, there is a chance of a significant rebound. Extensions to 28684, 28319, and 28051 are possible.

Above 29823, there would be the possibility of a significant rebound, first targeting the intermediate resistances 30220 and 30488, constantly to be monitored for possible short re-entries. The real target would be the touch of 30763, from where a wall up to the 31000 points zone begins and then the gap down to close.

Only a recovery of 31192-31643 could ensure renewed bullish strength. As long as we do not see this recovery, the best we can hope for is the start of an accumulation phase.

If prices remain above 31785, there would be no particular resistance until 32712-32956, with an intermediate zone in 32219-288. These areas should be monitored, as they could offer significant longs. We will, however, keep them in mind for possible short entries in pullbacks on a weekly basis.

Our monthly attention level will be 32834. Above it, prices may stretch to 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.

IMPORTANT NOTE: The technical expiries are over. The following two weeks could open up a mighty recovery of Wall Street and thus the end of the declines. If this does not happen, it may be almost impossible to see a recovery before next year. Keep an eye on the stock market at all times.

Also, it is wise to note Monday’s openings and Friday’s closings this week to confirm or deny the current trend. Avoid overtrading and watch out for volatility imparted by HFTs. Mark any gaps that may also appear during the week, paying particular attention to those on Monday.

Enjoy your trading!