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Market movers

The last week was characterised by high volatility in the stock markets. European stock markets managed to limit the damage thanks to the banking/financial sector, with positive closures. On the other hand, US indices (core inflation at 40-year highs) and UK indices (political chaos with the sacking of finance minister Kwarteng) disappointed.

The coming octave is full of macroeconomic appointments. Investors will focus on economic activity growth in China and inflation in the Eurozone and the UK.

Weekly analysis and market scenarios for DAX and Dow Jones

The stock markets touched new annual lows this week and recovered with some strength. The markets have reached a decisive point as we are in the mid-October setup. We will now see if we have reached an all-time low or if the market will continue its downward run.

If the stock markets return below the June lows, the descent could continue with worrying effects until October this year and then until March 2023. In the best-case scenario, we should add another 10% - 20% from current levels (for the S&P500 index means seeing the 3200-2800 area).

If stocks rise from the current lows without breaking them, the worldwide stock market (50% America, 30% Europe, 20% Asia, and emerging countries) may have a positive streak that may last 18/24 months. Between 5 & 10 years, one could expect returns averaging 12/18%.

What should we expect in the short term? What to expect in the short term? Now the financial markets will play an important game, and they will have to confirm or not that the worst is behind them.

The S&P500 index, after a sideways move in the 3600 area until Thursday morning, saw violent downward and upward movements after the release of the inflation figure. It touched the 3700 area and above on Thursday before sinking just below the 3600 area at Friday’s close.

The psychological support 3600 remains crucial. The index went over 3576-3555 and very close to the support around the 3485 mark. We will monitor whether the latter two levels can stop, at least in the medium term, the bearish direction of the markets and offer a reversal until December. Should we go beyond that, 3200 will be the target, which is sought after by funds, investors and traders halfway around the world.

New support in the following areas: 3557-3547, 3538-3524 and 3514-3507. The weekly support remains around 3485, a fundamental and historical level for the S&P500 index.

The S&P500 index shows a series of resistances up to the 3644 area. If the index can overcome the 3644 area, a solid recovery toward the next resistance area in the 3687-3710 area is expected. After that, we could have a vertical rise up to the 3755 mark and the previous resistances around 3774-3782, 3805, and 3821-3827.

Above 3821-3837, a new upward path begins, peaking at resistance in the 3887-3898 area; if breached daily, this area could reverse the weekly bearish trend.

The resistances in the 3920-3935 and 3946-3968 areas are confirmed. If the index retrieves these areas, it could be considered a first positive bias. The 4000-4022-4040 zone is the critical resistance to break down because above it price could stretch toward the weekly resistance 4072-4080, practically the same zone where, a couple of weeks ago, we had a widely warned price reversal.

At that point, prices could have a vertical climb because the sell-off of 13 September left significant volumetric gaps. The last resistance is in the 4134-4157 area, from where prices will try to stretch towards the critical 4182-4202 area, the monthly bullish reversal area.

Unless prices see a weekly close above 4202, any attempt at a bullish reversal will be short-lived. The 22 August gap in the 4221-230 area and closing of the index above 4258 will probably be decisive.

We can find confirmed resistances in the 4258 and 4393-308 areas. Other resistances are around 4313-4339, 4396, 4415-4451 and 4480.

The 4506 and 4554 are the resistance levels to be broken to see the downtrend that began in April reversed. The 4580-4590 is the area to overcome to break down the monthly resistance in the 4613 area.

A weekly close above 4613 may guarantee a reversal of the annual trend if confirmed on a monthly basis; the following targets remain 4717 and 4780.

How to move? A low is expected in the early hours of trading on Monday, and then a subsequent rise until Friday. It will also be possible to see an intraday retracement between Tuesday’s close and Wednesday’s opening in the early hours of trading.

Monday could be decisive for whether or not the Christmas rally starts or the year will probably end on annual lows.

DE40 – The German index remained stuck between 12150 and 12375 until the release of the US inflation data on Thursday afternoon, managing to touch the critical levels of our previous analyses, first in the 11950 area, then 12694. Finally, on Friday, it closed in the 12335 area.

New supports in the following areas: 12300, 12243-223, and 12167-069. The latter has seen the more significant buying activity in Thursday’s vertical rise.

Confirmed supports are in the 11875-11950-12024 area, which halted the price fall after the US CPI data. Losing it would mean new bearish pressures and a touch of the weekly support in the 11766 area; below it, extensions to 11650 and 11542. The 11095 mark could be a target in case of a massive sell-off. These levels can be seen as annual reversal points.

New resistances in the following areas: 122375-442, 12511-570, 12604. These areas can be easily overcome with an excellent volumetric push; the target remains the weekly resistance of 12676-12707 just touched last week. We will keep them in mind for possible short opportunities.

Resistances around 12857-899-939 (weekly resistance), 13028-13133, 13176-268 and 13371-418 are confirmed. The 12694 mark is the intermediate control level; the 13030 area is for possible bullish accelerations, and the 13391 is for potential weekly reversals.

The 13509-13676 area is confirmed as a crucial resistance. Only a recovery of this area could offer a significant price reversal. The critical resistance is around 13520. Intermediate resistances around 13371-254-200 are confirmed, and this area may favour some quick bounce and then look for new short entries.

Above 13509-13676 intermediate targets at 13743 and 13805.

Another key resistance is around 13854-13929. Only above it will there be chances to see medium-term recoveries.

Successive resistance levels are around 14003 and 14209. Volume-based analysis suggests that bearish momentum could remain strong if the price doesn't recover the 14347 and the 14440 marks. Surpassing the 14592-14545 area may be the only indicator of a more bullish phase.

The other remaining levels can come in handy to observe for pullbacks. Monthly resistance stays around 14810-899. Reaching levels 15261 and 15380 later could push prices up to 15570 and then towards the weekly resistance of 15665.

An intermediate resistance is around 15810, with a new bullish strength only above 15944.

Finally, a break of the resistance area around 16079-16136 would offer the possibility of a stretch toward the key resistance 16230, from which to target the 16300-16500 zone.

If by next Friday prices remain above 12463, we will see a chance for a bullish recovery on a monthly basis; below 11950, on the other hand, the weekly trend may continue to push hard to the downside.

US30 – The Dow Jones index remained sideways within our support and resistance areas, 29241-377 and 29432-529, respectively, until the release of the US inflation data on Thursday afternoon. Prices touched our support 28865 and flew in less than 24 hours to almost 30506 before closing Friday in the 29700 area.

The 29700 area is a key level for this week; a weekly close above or below it could lead to a new monthly trend.

The key level for this week will be 29345. Below it , in addition to 29619-529 and 29338-29264, we have two new support areas: 29159-28876 and 28800-28685. These are all excellent supports to look for long opportunities. Should they all be pierced to the downside, prices could move toward 28319, 28051, 27765, and 27019 in extension.

Above 29700, we could see vertical price accelerations, with the 29788-885-30000 area as a target. The new resistance is the 30109-311 area, where 30250 is the critical level to be broken for new bullish thrusts. The target remains the weekly resistance area 30645-930, beyond which we could see an annual trend reversal.

Resistances 31108-31245, 31512-31588, 31617-31861, 32006-32137 and 32445- 32631 are confirmed. To avoid new bearish pressure, the 30645 area must be maintained. Above 30873 and 31298, there are possibilities for bullish acceleration. A breakout of the intermediate resistance at 31562 could lead to the possibility of a bullish reversal. Key resistance is in the 32200 area.

Above 32445-32631, we have the resistances 32882-33035 and finally 33305-577. All these areas need to be broken through strongly; otherwise, any bullish attempt will probably end miserably. So we may have excellent opportunities to go short again.

The 33703-33890 is the first key area to be broken for a bullish acceleration; 34148-084 is our monthly attention level. Above it, prices could start a more consistent reversal.

New resistance around the 34254 area. Resistances at 35157-34850 and 34437 are confirmed.

Monthly positioning above 35599-35963 could offer a new bullish direction; 35157-34850 and 35614 areas are significant because they may lead to either direction extensions. Observing this area is extremely important.

A move through 36529 and holding that level would offer the possibility of seeing area 37000 if prices forcefully break the last resistance placed at area 36786. Above 36236, we maintain the possibility of further bullish volumetric thrusts.

IMPORTANT NOTE: Despite Friday's bearish pressures, traders' attitude remains to look for buying entry points between now and the end of the year. We expect a significant price recovery in the coming weeks. Any sell-off could be heavily bought, so watch out for V-reversals.

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

Happy trading!

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