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European stock exchanges closed the week mixed and with much uncertainty as they await this week’s central bank decisions.

In addition, the publication in the early afternoon of producer prices in the United States (on a monthly basis at +0.3%, expectations for +0.2%) also raised fears for continued tightening of interest rates. Following this, Wall Street opened in the negative.

The coming week will therefore be full of macroeconomic events, although investors’ focus will be on central bank decisions. The Federal Reserve will start on Wednesday 14, followed the next day by the SNB, Norges Bank, BoE, and ECB.

Friday the 16th will be the turn of the CBR (n central bank) accompanied by the December flash estimates of European PMI indices and the inflation rate in the Eurozone and Italy.

Weekly analysis and market scenarios for DAX and Dow Jones

The rally that started in early October looked like it was going to give us a long way to the end of the year after a very difficult year. The last week, however, has seen a strange movement which, despite being mainly based on quarterly technical expirations, could put the Christmas rally at risk in the US equity markets. What could happen until the end of the year?

A difficult situation in the US equity markets, which continues to be uncertain about which way to go. Every attempt to stretch to the upside is followed by a countermovement that brings prices back onto their stride. Next week, however, could be decisive. There will be two important pieces of economic news. On Tuesday, the Labour Department will publish the November CPI inflation report. On Wednesday afternoon, the Federal Reserve will raise rates again, with Fed chief Jerome Powell offering signs of further tightening in early 2023.

For now, an all-up end to the year is expected, as rates have been on the upward path since mid-October. However, we have not seen a week with such a significant decline since before the uptrend started in October. This event should warn investors against possible bearish accelerations. While waiting for the macroeconomic data, therefore, arm yourself with caution. By Thursday everything should be clearer.

If stock markets fall back below the October lows without recovering quickly, 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? 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 on Monday, after having broken through resistance 4074-4081, began a stormy course of ups and downs, but which led to prices closing on Friday on a very delicate support zone: the 3920-3915-3908 area, which if lost could lead to a change in sentiment and the weekly trend.

The following supports are confirmed: 3920-3915-3908 e 3872. The next area was literally "smashed", leaving significant volumetric gaps and only one relevant support 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.

3762 and 3711 are the monthly levels that support the current uptrend, so beware of any breakout of these levels: we could see new and heavy declines.

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, 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.

Confirmed intermediate resistances around the following areas: 3937, 3960-3969-3975, 4000-4006-4014, 4025-4047, 4052 and 4070.

New resistance in the 4074-4081 and 4096-4102 areas. The target remains a final resistance in the 4134-4157 area, from where prices could stretch to the critical area around the 4182-4202 marks, the monthly bullish reversal zone.

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 is uncertainty in the markets, and at the moment it is difficult to give an unambiguous interpretation of the charts.

The close of trading on 13 December will give indications, and it will depend on whether it has left behind the minimum or the maximum marked up to that point. In the first case, it will probably be bullish, in the second, perhaps we should start preparing for the worst. This is despite the month of December being statistically positive.

We will see what happens by next Thursday and we will adjust accordingly; in this market the only solution is to proceed step by step, precisely following the trades of the big players.

DE40 - The German index forcefully broke out of the 14600 mark on Monday and moved into the 14258-187 support zone for the rest of the week, but abandoned the 14300 zone, which is key in terms of maintaining the weekly uptrend.

The monthly 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 confirmed supports around the 14096-14007 area. 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.

New resistances in the area 14258-310-357, 14393-469, and 14548 where a solid resistance zone has formed. Any bullish attempt will end quickly if we don’t recover this last area.

At the monthly level, the recovery of 14000 points is already a reversal signal. The last obstacle is placed in the 14600 zone. The entire current zone can also create conditions for heavy reversal. To be monitored very carefully.

The monthly resistance in the 14810-899 area is confirmed.

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 14548, we will see a chance for a bullish recovery on a monthly basis; below 13975, on the other hand, the weekly trend may continue to push hard to the downside.

US30 – The Dow index fell very strongly this week, after having abandoned resistance 34461-378 on Monday, losing about 1000 points on a weekly basis.

Supports around 33256-182, 33325-346, and 33426 were confirmed.

33335 should be monitored. This level represents the Dow’s last monthly support. Losing it may trigger a major and long-lasting collapse, as we have already lost 33594, the first major support.

Confirmed supports placed in two well-bought areas: 31197-497 and 31536-764. The 32000 area is the psychological support. Other support areas are 31885-32064, 32118-211 and 32254-316, which are excellent for buying opportunities.

Support areas 32415-360 and 32546-624 are confirmed.

The area from 32624 to 33182 is completely volume-free due to the price jump on Thursday, 10. It can be pierced very easily.

The zone of 31036-31125 offered a new upward price turn. Confirmed 30953-815, 30715-614, 30559-381, 30253-136 and 29696-29906.

The 29485 mark remains a critical level. 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 34000 was lost hard and offered a new bearish acceleration.

Confirmed resistances around the following areas: 34461-378, 34498-548, 34652, 34701, and 34755.

New resistances in the 33688-777-886 areas, which remain the key area for a possible bullish recovery. Intermediate resistances in the area 33989-34066 and 34159-292.

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 option of further bullish volumetric thrusts.

IMPORTANT NOTE: We are in a crucial moment for the market. The Fed may push the market in a specific direction. Careful monetary management is recommended. We will have a lot of volatility this week.

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!

The post DAX 40 & DOW JONES: weekly analysis 12th - 16th December appeared first on Key To Markets Blog.