DAX30 & DOW JONES: weekly analysis 17 – 21 JAN

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DAX30 & DOW JONES: weekly analysis 17 - 21 JAN

Market movers

Last week still ends with a lot of uncertainty for equity markets after disappointing macroeconomic data, still rising inflation and a not particularly positive start to the quarterly earnings season (results of financial giants below expectations). Next week will be very rich in macroeconomic and corporate events.

Interesting insights will come mainly from Europe with the publication of consumer price trend figures.

After the concerns of the new Bundesbank chief Joachim Nagel about European inflation and the fears of ECB Executive Board member Isabel Schnabel about rising inflationary pressures due to the energy transition process, it will be crucial to monitor the trend of consumer price indices in the Old Continent. First meetings of the year also for central banks. The Bank of Japan and the Norges Bank will meet this week.

In addition, the publication of the quarterly accounts in the United States will get underway. Next week, Netflix will be the first stock in the FAANG to report its quarterly figures.

 

Analysis of the week and scenarios for DAX and Dow Jones

Last Friday’s close tells us that equity markets have once again attempted a bullish reversal; however, it is still premature to think that the declines are over.

The S&P500 Index, after seeing a weekly low in the 4,572 area, made a strong pullback to test the 4,743 area, and then closed around 4,664 points.

The intermediate support is located in the 4,642-4,615 area. Weekly support is in the 4596-4580 area.

Resistance at 4,717 and 4,780.

Vital area 4,559-4,534. Only below it, we will see the bearish forces take over.

It will be important to see how the price behaves if it touches the 4,429-4,474 area, the loss of which opens up more extensive bearish scenarios. We remember that the loss of 4,300 would represent a clear reversal signal.

How to move? The last week of the month will give us important indications on the general trend of the markets, in the meantime it will be necessary to navigate on sight. Monday and Tuesday could be key days in understanding the weekly trend.

DE40 – The German index saw a low on Monday (15,718) and then retraced to Thursday (16,079), closing in the middle of this trading range.

A break-down of the resistance 16,079-16,136, will offer a chance to see the key resistance 16,230, from which we will target the 16,300-16,500 area.

The 15,794-15,822 is the support of last week’s range, while the weekly support is located in the 15,755 area.

To be monitored in case of a break-down of the range, the support 15645-690, whose loss opens the doors to the key support 15,464-15,518.

Area 15,227-15,176 maintains the current bullish strength of the DAX.

Monthly support 15,119-15,043. The 15,000 points area remains of vital importance. We always watch the volumetric supports 15,017-14,981 and 14,842-14,804. The loss of these last two areas opens to new lows, with the first target in the 14,600-14,441 area. Vice versa a rebound on these supports can start a process of reversal to the upside, as already happened last week. Extensions in the area 14,231-13,974.

If by next Friday the prices will remain above 15,755, we will see a possibility of a bullish continuation; however, the behavior of the price in the 16,000 points area will confirm whether or not we could see new all-time highs. Below 15,464, however, the weekly trend can turn downwards.

US30 – The Dow Jones saw new all-time highs in early January, but selling pressures returned this week on higher Treasury yields, nervousness ahead of the start of earnings season and the defeat of the vaccine mandate to the Supreme Court by the Biden administration. The index failed to move above 36,530 and went below 36,000 points on Thursday, only to close near them on Friday.

A move through the 36,529 and holding that level, will offer a chance to see the 37,000 area if the prices break the last resistance in the 36,786 area. Above 36,236 we maintain the possibility of further bullish volumetric pushes.

On the downside, the range 35,963-35,599 will offer considerable resistance but also continuous ups and downs.

If the prices go below 35,599, the Dow can test the break-down zone of December 21, 2021, 35,312-35,197, which is a weekly support. The monthly support zone remains 34,701-34,755. Only below the latter the trend can really turn downwards.

The 34,015 remains a key area at the yearly level. Confirmed the support 33,980-33,725 up to the key support 33,608.

Next support at 33,215 and confirmed 32,956. The latter is to be monitored as a loss there could lead to fast and new bearish pressures.

Buying supports at 32,761-32,638 and 32,308. The strong buying zone created months ago at 32,308-32,137 is confirmed. Only below it we can witness stronger bearish pressures, with possible structural trend changes.

 

IMPORTANT NOTE: The market is under strong volatility pressure. For intraday trading it is optimal, but for multiday trading we are not yet in an easy situation to manage. It is recommended to wait for the monthly close to see what the chances are for a new uptrend. It is good, therefore, to follow the trend but also to keep under control the supports and the weekly closing, because a reversal can push with force at any time.

Also this week and’ wise to note the openings of Monday’ and the closings of Friday, in order to have confirmation or denial of the trend in course. Avoid overtrading and watch out for volatility imparted by HFTs.  Mark any gaps that may appear during the week, with particular attention to those of Monday.

Good trading!

 

Research provided by Giancarlo Prisco

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