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

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

Market movers

The last session of this week closed in the red after the NFP data in the US rose more than expected to 263,000 employed.

Despite this, the stock exchanges rebounded vigorously from October lows on expectations of a real slowdown in interest rates by the Fed at its next meeting in December (expectations confirmed by Powell and macro data).

As a result, the dollar lost momentum against major currencies and weakened sharply as government bond yields fell.

Next week will be relatively packed with macroeconomic events, including European service-related PMI indices, the third estimate of Eurozone GDP, and China's inflation rate.

However, there will also be no shortage of central banks, with the Fed and the ECB expected the following week, with interest rate decisions by the Reserve Bank of Australia and the Bank of Canada.

Weekly analysis and market scenarios for DAX and Dow Jones

By now, the Dow Jones, the strongest Wall Street index, is very close to recovering the January highs. Just under a month remains to close 2022. Will the attempt at the annual highs on Wall Street be successful? What will the US stock markets do until the end of the year?

2022 has been a challenging year for US stock markets, and not only, which have lost between 20% and 35% since the start of the year. From October onwards, however, we have seen an exciting recovery from the lows that could, at least for some indices, bring the annual performance into positive territory. One month before the yearly close, the Dow Jones is only down a little over 5%. On the other hand, the NASDAQ Composite and the S&P500 are still down between 15% and 25%. Therefore, closing in the positive territory may be improbable for the last two indices. We should also remember that the DAX is still in negative territory, but the loss is less than 10%.

This upward movement, which began in October, may have already formed the low of this decade and, by April 2023, could lead to new highs from 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 4072-4080 resistance but failed to stabilise above it. On Friday, prices closed in the 4066 area, offering no further declines, so the chances of seeing further uptrends this week are considerably high.

New intermediate supports at 4058-4047-4034-35-4028 and 4017. Following levels: 3996-3985, 3979, 3968-3960-3950. 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, 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 in the 4074-4081 and 4096-4102 areas. The target remains a final resistance in the 4134-4157 area, from where prices could stretch to the critical area around the 4182-4202 marks, the monthly bullish reversal zone.

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.

It could go up until 20/21 December between physiological highs and lows. The monthly high should be marked on the year's last trading day.

Also, the trend should be bullish this week, with the minimum between Monday and Tuesday and the maximum on Friday. The price dynamics between Tuesday and Wednesday could lead to a retracement, so monitor the most important supports and resistances.

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

DE40 - The German index maintained a bullish laterality, managing to break through 14600 but without going above 14374.

The monthly 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 in the 14481-515, 14425, 14374 and 14324-296 areas, where prices created a solid resistance zone.

14300 remains the level to hold. On a monthly basis, the 14000 recoveries could already be a reversal signal. The last obstacle is placed in the 14600 area. The entire current zone can also create conditions for heavy reversals. To be monitored very carefully.

The monthly resistance in the 14810-899 area is confirmed.

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 continued its bullish run, closing the week in the 34442 area after touching the 34701 area.

Confirmed supports in the 33256-182, 33325-346, 33426, and 33564-596 areas.

New supports in the 33673-709-813 and 33900-979 areas (the index should not break them on a weekly basis). The areas saw substantial volume accumulation confirming the strength of the uptrend that started on Wednesday evening. Other relevant areas are 34187-34304 and 34378-461, which are helpful in looking for new long opportunities.

33594 and 33335 should be monitored. These levels are the Dow’s last monthly supports. Losing them can trigger a significant and long-lasting collapse.

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.

The area from 32624 to 33182 is completely volume-free due to the price jump on Thursday, 10. It can be pierced very easily.

The zone of 31036-31125 offered a new upward price turn. 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 34000 was held firmly and offered a new bullish acceleration.

New resistances in the 34498-548 area, 34652 and 34701. Resistance around 34755 is 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 option of further bullish volumetric thrusts.

IMPORTANT NOTE: The final rush for equity markets continues. Oversee the economic calendar and see how prices behave when the most important macro data is published; if the Fed has confirmed, for now, that it will not go against the market, then we should go up throughout December. We will see.

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 5th - 9th December appeared first on Key To Markets Blog.

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