DAX 40 & DOW JONES: weekly analysis 28th November – 2nd December

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DAX 40 & DOW JONES: weekly analysis 28th November - 2nd December

Market movers

In recent days, the rise of Covid-19 cases in China weighed on crude oil prices, which returned to their September lows, while the dollar has weakened sharply in the wake of Fed minutes that showed a solid willingness to tone down the pace of increases.

The coming week will be particularly eventful, the main ones being the flash estimate of Eurozone inflation, the PCE Core Index and Non-Farm Payrolls – the last two relating to the US.

Investors will therefore be ready to seize any hint of optimism that might prompt a change in the ECB and Fed’s monetary policy strategies.

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.

We are approaching the last monthly setup. What will happen on Tuesday could be an obstacle to the bullish trend or help the indices to push even stronger to the upside.

In the meantime, unless substantial changes, the minimum targets are to exceed the highs marked in August by the end of November (the Dow Jones has already done that).

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 in 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? 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 reached new highs this week, going above the 4000-4040 resistance but failed to stabilise above it. On Friday, prices closed in the 4034 area, offering no further declines, so the chances of seeing further uptrends this week are considerably high.

New intermediate supports can be found around the 4035-4028 and the 4019-4013-4006 marks. Following levels: 3996, 3988-3980, 3971-3963. A potential weekly uptrend reversal is expected if prices break the 3900-3872 area.

The following supports are confirmed: 3942, 3933-3928, 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, 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 4000-4017-4040 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? When a significant low is marked in October, the rise starts until the end of December and extends until 30 April. At least this has happened in most cases for over 100 years, and we will see if this sample path will continue this time.

This week the trend should be bullish, with the low between Monday and Tuesday and the high on Friday. Tuesday’s price dynamics could lead to a trend reversal, so checking the weekly support levels is essential.

We will see what happens by next Wednesday and adjust accordingly; in this market, the only way is to proceed step by step, precisely following big players' trades.

DE40 - The German index maintained a bullish laterality, managing to break through 14440 but without going beyond 14592-545, a very important resistance.

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.

New supports around the 14319 and 14374-442 marks.

The 14440 area remains the area to be maintained.

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 13975, we will see a chance for a bullish recovery on a monthly basis; below 13621, on the other hand, the weekly trend may continue to push hard to the downside.

US30 – The Dow index, despite low volatility due to Thanksgiving Day, continued its bullish run, ending the week in the 34395 area, with levels not seen since early June this year.

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 10th price jump. It could be pierced very easily.

Supports 33256-182 confirmed. New supports in the 33325-346, 33426, 33564, 33644-705 and 33733-779 areas.

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 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 33890 mark has been broken down and offered a new bullish acceleration.

New supports in the 34016-33985, 34093-34154, 34237-311, and 34250-395 areas. The 34004 area, if lost, may trigger a very violent vertical fall, leading to 33680-594 and 33335.

Resistances 35157-34850, 34437, 34501 and 34755 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: The final rush begins for the stock markets. Follow the economic calendar carefully and check how prices will behave when the most important macro data, such as the NFPs on Friday, are released.

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 28th November - 2nd December appeared first on Key To Markets Blog.

Source: DAX 40 & DOW JONES: weekly analysis 28th November - 2nd December