DAX 40 & DOW JONES: weekly analysis 14th – 18th November

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DAX 40 & DOW JONES: weekly analysis 14th - 18th November

Market movers

The week closed higher in Europe and the U.S. after the release on Thursday, November 10, of the U.S. inflation figure, which was found to have slowed to +7.7 % y/y in October. The markets’ reaction was abrupt, causing the U.S. dollar to lose somewhat against all currencies while Wall Street recorded its best daily session since 2020.

Despite this, the spectre of a recession is still feared in the Old Continent. In fact, on Friday, the UK’s GDP contracted by 0.2 %, while inflation in Germany in October rose as expected by +10.4 % y/y.

This week, investors will focus on macro data (GDP, ZEW Index, unemployment). In particular, they will concentrate on the Eurozone inflation rate in October, published on Thursday.

On the same day, there could be sharp fluctuations in the pound and GILTS due to the presentation of the UK’s new fiscal plan by PM Sunak and Finance Minister Hunt.

Finally, on Friday the 18th, there will be the inflation data in Japan, which could affect the USD/JPY pair.

Weekly analysis and market scenarios for DAX and Dow Jones

The uptrend that began close to our mid-October setup continues to be fueled by intraday, or at most 1/2-day, retracements. In similar contexts, the uptrend has lasted a long time in price and time.

Over the past few days, after some indecision, stock markets have run strong, as expected. What to expect from now on? The question for all those who have been watching projecting new lows is the following: when will there be a retracement in international markets?

The coming week will give indications on this, and the expiration of the monthly setup on November 14 will help analyse the current trend. For the time being, if the stock exchanges do not come to a standstill and something does not change, the minimum targets are to exceed by the end of November the highs marked in August.

This could be the first step, but such a move may have already formed the low of this decade, and by April 2023, it could lead to new highs over 2022.

This would not be an exceptional event because declines of 25/30% have been reabsorbed even within 12/18 months from the formation of pre-crisis highs.

The reasons that drove markets down (war in e, inflation, and rising interest rates) are still evident, but improvement is on the horizon.

Markets move earlier than the business cycle and geopolitical issues, and it is now believed that the current problems will be, if not resolved, at least scaled back in the coming months. In addition, the rate hike, for the time being, should have come to an end for several months.

The descent could continue if the stock markets return below the October lows. 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 continue their rise, 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 phase of indecision, began a new bullish path after the release of the negative inflation figure. Breaking through resistance 3946-3968, it touched the 4,000-point area on Friday.

We can find new intermediate supports in the 3982-3968 area, the first control zone of this uptrend, then 3950, 3928-3915-3908 and 3872. The next area was literally ” smashed “, leaving wide volumetric gaps and only one relevant support, which we consider weekly, in the 3762 area.

Supports around the areas 3669, 3680-3689-3701, and 3711-3726-3733 are confirmed. The latter marked last week’s accumulation area.

The psychological support 3600 remains crucial. Support around 3644-3651 points has halted the fall and is now the monthly support after this strong uptrend. Prices should not return around that area again to avoid new heavy bearish pressure. Notable levels below it are 3607, then again supports 3557-3547, 3538-3524 and 3514-3507. The 3485 support is now the annual, key and historical level for the S&P500 index. We will test whether this last level could stop, at least in the medium term, the bearish direction of the markets and offer a reversal until December. Should we go beyond it, 3200-3300 will be the target, sought after by funds, investors and traders halfway around the world.

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, 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? There will likely be intraday retracements from time to time, but not real lasting bearish reversals. According to our studies, this is unlikely in the short term.

The bullish movement should strengthen further. There are no reasons to believe that the uptrend that began close to our 17 October setup will come to a significant halt.

The uptrend should continue, and the following dynamics are projected:

On Monday, prices will probably post the weekly low, while on Tuesday, the weekly High.

Monday is expected to be a redstart and give way to new uptrends. A different scenario instead, i.e. closing the session with lows below those of 11 November, could lead to a retracement until Wednesday 16, before new rises. In the worst-case scenario, the maximum downward extension expected would be for the following week.

DE40 - The German index continued its bullish run, reaching, at Friday’s close, levels not seen since 9 June, namely the 14347 area.

The weekly support is in the 13621 area. The Dax left a huge volumetric gap after the FED inflation data. The area between 13692 and 14007 can be penetrated very easily. We can find new intermediate supports in the 14258-187 and 14096-14007 areas. Solid supports in the 13692-608, 13550-516 and 13457-410 areas. Confirmed supports around 13314-333, 13331-410, 13438-467.

Intermediate volumetric supports are confirmed in the 12865, 12833-12909, 12978-13038, 13113-178, 13222-280, and 13307-357 areas.

Support in the 12808-766 area is confirmed. From 12628 to 12766, there are a series of intermediate supports, helpful for looking for long pullback entries. 12566 becomes monthly support.

Other key supports are 12407-517 for volume concentration and 12353-275, the first bullish turn zone. Confirmed supports in the 12223 and 12136 areas.

Confirmed supports are in the 11875-11950-12024 area, which halted the price fall after the US CPI data on Oct 13th. 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.

The 14347 and 14440 are the areas to be broken down. At the monthly level, the recovery of 14000 points could be seen as a reversal signal. The last obstacle is placed in the 14592-545 zone. The entire current zone can also create conditions for heavy reversals. To be monitored very carefully.

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 13621, we will see a chance for a bullish recovery on a monthly basis; below 13446, on the other hand, the weekly trend may continue to push hard to the downside.

US30 – The Dow index reached the 34000 points area this week, very close to the mid-August highs, in the wake of the inflation figure.

Supports in two well-bought areas were confirmed: 31197-497 and 31536-764. The 32000 area is psychological support. Other support areas: 31885-32064, 32118-211 and 32254-316, excellent for buy opportunities.

New support areas: 32415-360 and 32546-624.

The area from 32624 to 33182 is completely volume-free due to last Thursday’s price jump. It can be pierced very easily. The last supports of the week are 33256-182, 33315-492, 33580-704, and 33780-889.

The 31036-31125 area offered a new upward price turn. Supports in the following areas are also confirmed: 30953-815, 30715-614, 30559-381, 30253-136 and 29696-29906.

The key level for this week will be 29485. Below it, in addition to 29619-529 and 29338-29264, we have the following confirmed 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.

The resistance around the 33035 and 33305-577 are confirmed. All these areas must be broken strongly. Otherwise, any bullish attempt will probably end miserably. So we may have excellent short opportunities.

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: Bullish pressure is intense. Tuesday’s mid-term elections and Thursday’s US inflation figure did not faze the markets. We should continue at least until the end of the month. We will see.

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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Source: DAX 40 & DOW JONES: weekly analysis 14th - 18th November