Last week was very negative for stock indices. Some negative quarterly reports (Netflix) and Powell’s words at the International Monetary Fund meeting on Thursday led to a violent turn of the stock market, opening to new and violent declines. The market has seen strong redemptions from investment funds last week, so the fragility of prices remains high, as the market still has to face many negative factors.
The next octave will be very intense, with many important macroeconomic news: Monday in Germany will be published the IFO index; Tuesday and Wednesday, we will see the consumer confidence and pending contracts for home sales in the U.S.. Thursday and Friday we will see the quarterly GDP reading in the US and Germany respectively. To be followed on Thursday is the BoJ press conference, given the unstoppable rise of the USD/JPY currency. As for quarterly reports, this week we will see data from FAANGs, Wall Street’s most important stocks.
Thursday and Friday’s reversal in Wall Street, puts on the plate the possibility of seeing the yearly view confirmed, which sees strong declines until late June.
If there will be no sudden recovery of the stock markets, the scenario that sees the formation of new annual lows will gain strength.
The S&P500 index, after reaching the weekly key level 4506 on Thursday, confirmed again the strength of this resistance, turning violently downwards and closing near the support 4215.
The weekly trend will remain bearish as long as we do not see a close above 4506 by next Friday. If the prices do not stay above 4506 this week as well, the market will continue at least a slow descent.
Intermediate resistances at 4269, 4313-4339, 4396. 4415-4451 y 4480.
The 4506 and 4554 remain, therefore, the resistance levels to break down to see a new bullish attempt. The 4580-4590 is the area to overcome, in order to try to break the monthly resistance in the 4613 area.
The weekly close above 4613 guarantees the monthly bullish trend; next targets are 4717 and 4780.
We will watch 4182-4215 and 4113, because if we lose them violently we will have a quick closure of a gap placed in the 4000 points area.
How to move? Attempt a rebound between Monday and Tuesday before giving way to a new bearish directional phase until Friday. Probably the weekly high will be marked on Monday, and the minimum on Friday. We will analyse the levels day by day to understand if there will be possibilities of modification of the bearish scenario.
DE40 – The German index tried this week to break our resistance placed in 14592-545 area, llegando a tocar los 14607. From thursday on, following the US indices, the prices started a vertical fall, closing on friday in the 14018 area.
The weekly resistance to break down is now in the 14486-546 area. New intermediate resistances are in the 14350-398 area and 14319-239. The latter, if recovered on a weekly basis, can offer new bullish strength. To monitor the area 14157-089. Confirmed the monthly resistance in the area 14810-899.
A recovery of the 15261 area first and then 15380, can offer a bullish impulse up to the resistance 15570, where we will check the possibility of a new attack on the weekly resistance 15665. 15261 is easily reached this week.
Intermediate resistance at 15810 and new bullish strength above 15944. Finally, a break of resistance 16079-16136, will offer a chance to see key resistance 16230, from which to target the 16300-16500 area.
The monthly support 13924 remains untouched, although after this vertical fall it is very likely to see it pierced; from this level important purchases have accumulated up to the key support placed in 13690 area. Support confirmed at 14026, under which a fast decline can start with first target the support 13924.
If the Dax should fall below 13690, the intermediate supports we will have in area 13555 and 13442, under which it can push hard and go to look for the following support in area 13200. From here the price has no obstacles until 12955 and here it can also rebound strongly.
The monthly support we place in the area 12900-12860. Key support in the area 12700, area that has shown its strength with the rebound of last week and that is vital for a possible accumulation phase. Confirmed the 12500-435 area as annual support. Extensions to 12155 and 11766.
If by next Friday, prices remain above 14319, we will see a possibility of a bullish continuation; below 13924, however, the weekly trend may push down again strongly.
US30 – The Dow Jones, as well as other U.S. indices, collapsed vertically. After having touched the 35551 area on Thursday, we witnessed a vertiginous fall, touching the key support area 33886.
New weekly resistance at 35398 area. Intermediate resistances at 35157-34850, 34437 y 34237. The 33886 are confirmed, but remain now a very weak support.
A weekly positioning of the prices above 35599-963, will offer a new bullish directionality; 35157-34850 and 35614 are the levels on which the prices can restart to the upside or push down again. This requires us to constantly monitor prices on these levels.
A movement that will cross the 36529 and that will keep this level, will offer the possibility to see the 37000 area if the prices will strongly break the last resistance placed in the 36786 area. Above 36236 we maintain the possibility of further bullish volumetric thrusts.
Below 33886, possible extensions to 33726 from where we start to have strong volumetric areas, with peaks at 33521 and 33378. All excellent areas to look for long entries. Below 33378 we could quickly attack 33265- 32956, key support from where this rebound started.
Support is confirmed at 32813 area and the key support remains at 32636-566 area. Losing this level might lead to new heavy declines.
Other supports at 32308-215 137. Only below it we can see stronger bearish pressures, with possible structural trend changes. First targets in area 31973 and 31567.
IMPORTANT NOTE: The market is increasingly volatile. The bearish directionality seems to have taken over. If the key resistances are not recovered quickly, it is good to avoid any long entry.
Also this week it is wise to take note of Monday’s openings and Friday’s closings to confirm or deny the current trend. Avoid overtrading and pay attention to the volatility impressed by HFT. Mark any gaps that may appear during the week, with particular attention to those of Monday.
Research provided by Giancarlo Prisco
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