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DAX 40 & DOW JONES: weekly analysis 20th – 24th February

Started by PocketOption, Feb 22, 2023, 04:21 am

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DAX 40 & DOW JONES: weekly analysis 20th - 24th February

Market movers

European stock exchanges closed the week in the red after renewed fears of a longer-than-expected monetary tightening following inflation and retail sales data.

This week, investors will focus on the usual macroeconomic data and the PMI indices of the major European and American economies. In addition, the quarterly earnings season is drawing to a close with Walmart, NVIDIA and Alibaba releasing their accounts.

However, the focus will be on the Eurozone inflation rate (to be published on Thursday 23rd) and the US core PCE index (Friday 24th). The latter could confirm the hawkish stance of the US central bank should it turn out to be higher than the estimated +4.3%.

Weekly analysis and market scenarios for DAX and Dow Jones

Last week we witnessed a significant correction in equity indices in line with February's seasonality, which has seen declines since the middle of that month.

However, it should be considered that the markets have not performed a sell-off, so the bullish trend still has a chance to proceed.

If the confirmation is bullish this week, we could see a strong uptrend until the first ten days of March. If not, the indices will continue to fall until that date.

The likely lows in October will have a high probability of remaining so for many years. They could represent the lows of the entire decade. Now, despite some short-term overbought, the markets are unstoppable and will be so for a long time. Here is why.

We have repeatedly explained that equity prices tend to move at least 6/9 months earlier than the business cycle. For this reason, during the final part of 2022, the markets would have posted a significant bottom between June and October and then taken off again for the long term. The prices marked during the year had discounted the most unfavourable geopolitical and geo-economic conditions.

During 2023 we expect the following pattern to emerge: the low should be posted in January or during Q1, and the high during Q4. Average market returns of up to 20-25%.

As always, we will confirm the annual forecast from time to time.

The S&P500 index suffered intense sideways movement last week, in a range of just over 100 points, between the resistance of 4182-4202 and the 4066 broken on Friday and recovered at the weekly close.

If prices remain above 4144, the weekly resistance, this week, the index can continue to look for bullish targets for monthly reversal, i.e., in addition to 4182-4202, the closing of the 22 August 2022 gap in the 4221-230 area and 4258.

New support in the 4081-4066-4060 areas. The loss of this level may lead to a sharp fall, given the speed of the previous rise. In this scenario, the first target could be the 4040 mark, then lower supports around 3999, 3968-3975 and 3949, which is our weekly support. These levels are ideal for intraday and multiday buying. 3930-3918-3907 remains a crucial support area. Confirmed 3893-3887, 3863 and 3834-3844. Critical support in the 3808-3798 area, below which prices could start a new downward spiral.

Supports around the areas 3669, 3680-3689-3701, and 3711-3726-3733 are confirmed.

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. Should we go beyond it, 3200-3300 will be the target, sought after by funds, investors and traders halfway around the world.

In addition to resistance 4154-165, without whose recovery the index will not turn bullish on a weekly basis, prices formed significant walls in the 4141-4135-4125 and 4113-4109-4100 areas, ideal levels to look for new short entries.

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? This week we will have to see whether or not, between Monday and Tuesday, prices will start to rise again. Otherwise, we could have a bearish continuation.

DE40 - Despite the general bearish pressure, the German index remained stuck between resistance 15583-659 and support 15351-281, with no possibility of breaking through these extremes.

New support in the 15473-402 area and confirmed supports at 15351-281, 15202-114 and 15086-035. The 14967 area again confirmed the validity of this important support zone, which remains weekly. 14939-14916 and 14814-712 confirmed.

Intermediate supports around the 14138-184, 14342 and 14414-538 areas. The monthly resistance around 14810-899 has been broken down, so the Dax may start a medium-term reversal.

New key zone in the 13814-781 area. The loss of the volume zone 14069-13974 opens the way to the monthly support in the 13621 area.

Monthly support in the 13621 area. The Dax left a huge volumetric gap after the FED's inflation figure, which was easily penetrated at the loss of 13975.

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 resistance around the 15583-659 is confirmed, and becomes the area to be broken to overtake the weekly resistance around 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 critical resistance 16230, from which to target the 16300-16500 zone.

If by next Friday prices remain above 15525, we will see a possibility of a bullish continuation on a monthly basis; below 14989, on the other hand, the trend may push forcefully downwards.

US30 – The Dow Jones Index had a very volatile week, first attempting to break through resistance in the 34998 area, but without success. After a tough battle in the 34000 area, prices touched our support in the 33432-580 area. Prices then turned and closed the week at 33827.

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, and we can find new support in the 32696-810 area. The 32870 mark remains the weekly support.

The zone of 31036-31125 offered a new upward price turn. Confirmed support around 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.

Support zones in the 32872-975-33097 and 33136-252 areas are confirmed. The latter is not to be missed to continue a strong uptrend. Weekly support is around the 33364 mark, and monthly support is around the 32870 mark.

Confirmed support in the areas 33432 and 33681-823 are particularly packed with buyers and will be our most important defences against further declines.

New resistances in the 33808-890, 33981-34033 and 34203-34330 areas. Another key level will be the 34143 area, which is the weekly resistance. Confirmed resistances in the 34348-498, 34607-706, and 34801-34950 areas will be our targets next month.

Monthly positioning above 35599-35963 could offer a new bullish direction; 35157 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: The retracement has arrived. We have to follow the ongoing movement. If prices remain sideways, try to trade in the extremes, as volatility is and will remain high, bringing plenty of opportunities.

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 20th - 24th February appeared first on Key To Markets Blog.

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