DAX 40 & DOW JONES: weekly analysis 5th – 9th Semptember

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DAX 40 & DOW JONES: weekly analysis 5th - 9th Semptember

Market movers

A week to forget for financial markets that discounted Powell’s words, delivered in Jackson Hole, that hinted at the Fed’s continuation of aggressive monetary policy. Disappointing and contracting PMI indices also sunk European financial markets. The only positive note was the Non-Farm Payrolls figure released last Friday, which was up at 315K employed in August, with the unemployment rate up slightly to 3.7%. Thus, markets rejoiced in the wake of expectations of interest rates calming in the medium term.

Next week the focus will be mainly on the ECB meeting on Thursday, September 8, where the central bank will raise rates, for the second time this year, with an estimated increase of 50 or 75 basis points. Also, watch out for the European PMI indices for services and construction, to be released today and tomorrow, which could bring much market volatility.

Weekly analysis and market scenarios for DAX and Dow Jones

The expiration of the annual set-up on August 16, as expected, led to significant changes, having probably identified a period high. However, the maintenance of monthly supports must be confirmed; thus, this week will be decisive to ensure the following scenario.

Stock selling continued strongly this week, and now room may open up for a further decline of 10/15% over the next two months.

We could then assist in a possible change of the annual scenario from the forecast, which to date had been in line with the price trend since the beginning of the year.

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 20 % from current levels (for the S&P500 index means seeing the 3200-2800 area).

If the global stock rises from the current lows (50% America, 30% Europe, 20% Asia, and emerging countries), we may see 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 closed the week around 3933 points after falling slowly all week.

New resistances in the 4044-4025, 4019-3988, 3968 and 3925-3939 areas. Last week’s resistance areas 4059-4075, 4107-4135 and 4184-4202 were confirmed. In case of bounces, all these areas could be excellent opportunities for short entries.

Unless prices see a weekly close above 4202, any attempt at a bullish reversal will be short-lived. Weekly bullish reversal with gap closure 4221-230 and weekly close above 4258.

The loss of 4185 led to the activation of the weekly bearish reversal signal. Monthly support is around 3920.

Confirmed supports are in the 3875 area, 3905-3909. 3875 is critical. Below this level, bearish pressure may materialise. Further levels are 3832-3826, 3805 (psychological support area), 3769-3752 and 3730. We will monitor these levels for potential new long opportunities. However, keeping in mind the volumetric supports in the 3769-3752 and 3730 areas, a reversal of the monthly trend could be possible at the break of the 3700 area if prices accelerate back below 3711.

In case of new collapse, 3576-3555 and 3485 may be essential support zones in the medium term holding off bearish momentum. If ranges don’t hold, we may see 3200. Many investors are looking with great attention at this level.

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

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? Bullish clues will have to be confirmed between today and tomorrow. A completely bullish week is looming, with the low on Monday and the high on Friday.

However, other than intraday trading, there are no high probabilities for trading bullishly or bearishly beyond one trading day.

Monday’s trading day is expected to start in a bearish sideways direction, then leave room for an uptrend until the close. A different With the day closing below today’s lows, a different scenario of a sharp market decline.

We have reached watershed levels from a yearly perspective.

DE40 – The Dax has been up and down this week, with the high touched on Tuesday at 13153 and the low on Thursday at 12569.

Intermediate supports are around the 12626 mark. The weekly support remains in the 12536-434 area, also the annual support. In case of loss of this yearly support, possible extensions to 12155 and 11766, where we could see the annual reversal of the index.

New intermediate resistances in the 12765-810, 12898-948 and 12994-13057 areas.

The 13509-13676 area constitutes the last weekly resistance zone. Only a recovery of this area could offer a significant price reversal. Weekly resistance at 13520. Intermediate resistances at 13371-254 and 12964-13076, an area that may favour some quick bounce to seek new short-entry opportunities.

Above 13509-13676 intermediate targets at 13743 and 13805.

The key resistance area is around 13854-13929. If prices can consolidate above, we may assist in some 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 14347 and 14440. Surpassing the 14592-15545 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 area.

If by next Friday prices remain above 13371, we will see a chance for a bullish recovery on a monthly basis; below 13051, on the other hand, the weekly trend may continue to push hard to the downside.

US30 – The Dow Jones index opened with a gap down early in the week, breaking down weekly support 31987 on Tuesday and closing Friday at the key level 31327.

New weekly support at the 30911 area. Should the level be lost strongly, the index is likely to drop to the new support around 30766-690, and from there, if broken, it will fall towards the yearly lows 30436-30122, where many purchases have been concentrated. The 30436 level constitutes a crucial point of this uptrend.

The last support zone in the 30224-122 area was confirmed as the last defence before new falls.

Below 29823, there are possibilities of seeing lower lows; the index may reach down to 29119 if 29618 doesn’t offer enough support. If we go further than this, we may see downward extensions towards 28684, 28319, and 28051.

Intermediate resistances in the 31283-290 and 31716-31998 areas. A weekly recovery of the 32094 and the 32207 marks would be an essential bullish signal.

The weekly resistance is in the 32381-32621 area. The following is in the 32882-33035 area and the 33305-577. All these areas must be passed firmly. Otherwise, any attempt will probably end miserably. So we may have excellent opportunities for short entries.

33703-33890 is the first critical zone for a bullish acceleration; 34148-084 is our monthly attention level. Above it, prices could begin a more substantial reversal.

A new resistance area can be found around 34254. Confirmed resistances around 35157-34850 and 34437.

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: September is historically a bearish month. However, the extent of the downturn, which could be very deep, is unclear. It is wise to proceed with extreme caution. 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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