DAX 40 & DOW JONES: weekly analysis 07th – 11th November

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DAX 40 & DOW JONES: weekly analysis 07th - 11th November

Market movers

Last week’s close was very positive in the stock markets in the wake of expectations of a U-turn by the Chinese authorities regarding the zero-tolerance policy of Covid-19 but also because of the Non-Farm Payrolls data in the US. The long-awaited U.S. employment report showed a mixed result, with the number of employed people in October rising more than expected to 261 thousand while unemployment increased to 3.7% y/y.

Meanwhile, in recent days the stock exchanges have had to endure two 75-basis-point hikes by the Fed and BoE, which, however, have indicated that the intensity of the hikes may be less in the future due to a general deterioration in macroeconomic fundamentals.

Few relevant events will characterise the beginning of next week. Instead, investors’ attention will be focused on the mid-term elections and the October U.S. inflation figure due to be released on Thursday, Nov. 10-which may or may not confirm the U.S. central bank’s restrictive monetary policy in the coming months.

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 terms of both price and time.

There is great optimism among European and international stock exchanges, and Friday’s close seems to confirm a bullish outburst, which could continue for several weeks. The Fed has not dented investor confidence much more.

For the time being, if the stock exchanges do not come to a standstill and something does not change, the minimum targets are to exceed the highs marked in August by the end of November.

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 of 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 for several months.

If the stock markets return below the October lows, the descent could continue. 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? 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, at the beginning of the week, after standing at our 3920-3035 resistance, began a corrective path, culminating with Powell’s words Wednesday evening. Prices saw support around 3711-3733 on Thursday, then closed the week in the 3772 area.

Supports around the areas 3669, 3680-3689-3701, and 3711-3726-3733 are confirmed. New supports around the 3760-3372 area.

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.

New resistance came with the Fed, in the 3786-3798 area. From here on prices are free of volumetric zones up to the 3834-3847-3853 area. Should these levels be breached, prices would find few obstacles up to 3884-3893 and the 3914-3920-3935 area. This confirms the ongoing bullish strength; any upward pressure would see very few obstacles.

The S&P500 index shows a series of resistances up to the 3644 area. If the index can overcome the 3644 area, a solid recovery toward the next resistance area in the 3687-3710 area is expected. After that, we could have a vertical rise up to the 3755 mark and the previous resistances around 3774-3782, 3805, and 3821-3827.

Above 3821-3837, a new upward path begins, peaking at resistance in the 3887-3898 area; if breached daily, this area could reverse the weekly bearish trend.

The resistances in the 3946-3968 area are confirmed. If the index retrieves these areas, it could be considered a first positive yearly bias. The 4000-4022-4040 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? A bearish sideways phase is expected to begin between Monday afternoon and Tuesday, then give way to a strong uptrend through Friday. Another time a new sideways phase could develop is between Wednesday afternoon and Thursday in the opening/early trading hours.

We saw a strong uptrend in the past few days. This is likely a breakout that could continue for several weeks and immediately take the markets back above the August highs. Confirmation for next week will come from the close on Tuesday, November 8

No annual setups will expire until December, which leaves us to expect a Christmas rally to continue. The FED meeting and the mid-term elections will be important tests for financial markets.

DE40 - After a slight corrective phase, the German index has risen very close to resistance in the 13600 area, a break of which would open up new solid rises.

Weekly support is in the 13014 area. On the other hand, new intermediate supports are in areas 13181-222, 13314-333, 13331-410, and 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 13509-13676 area is confirmed as a crucial resistance. Only a recovery of this area could offer a significant price reversal. The critical resistance is around 13520. Intermediate resistances around 13371-254-200 are confirmed, and this area may favour some quick bounce and then look for new short entries.

Above 13509-13676 intermediate targets at 13743 and 13805.

Another key resistance is around 13854-13929. Only above it will there be chances to see 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 the 14347 and the 14440 marks. Surpassing the 14592-14545 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 zone.

If by next Friday prices remain above 13013, we will see a chance for a bullish recovery on a monthly basis; below 12865, on the other hand, the weekly trend may continue to push hard to the downside.

US30 – The Dow index is taking a breather. Last week, after breaking 32790, a fundamental level, attacking 33000 points, a late August area, prices closed in the 32376 area after Wednesday’s Fed meeting.

Supports placed in two well-bought areas were confirmed: 31197-497 and 31536-764, which act as weekly support zones. The 32000 area is psychological support. New support areas: 31885-32064, 32118-211 and 32254-316, excellent for buy opportunities. Other areas: 32590-692 and 32862-32956. The levels of 32489 and 32902 will be interesting volumetrically if touched.

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 key level for this week will be 29485. 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 resistance around the 33035 and 33305-577 are confirmed. All these areas must be broken strongly, otherwise, any bullish attempt will probably end miserably. So we may have excellent opportunities to return short.

The 33703-33890 is the first key area to be broken for a bullish acceleration; 34148-084 is our monthly attention level. Above it, prices could start a more consistent reversal.

New resistance around the 34254 area. Resistances at 35157-34850 and 34437 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: Bullish pressure is strong. Tuesday’s mid-term elections and Thursday’s U.S. inflation figure will be the final test. If the indexes do not go down, we will likely go up extremely hard.

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 07th - 11th November appeared first on Key To Markets Blog.

Source: DAX 40 & DOW JONES: weekly analysis 07th - 11th November