Despite a few pullbacks, last week closed on a positive note for stock markets. Uncertainty still remains high on future economic scenarios that will depend on the evolution of the crisis in Ukraine (possible decision by Europe on Russian gas imports) and the risks of stagflation. Inflationary pressures are particularly worrying and next week we will have data on the consumer price index in Europe and the core PCE (personal consumption expenditures) index in the United States. With the next data available we will have a clearer idea of the next moves of the respective central banks.
Other macroeconomic data of particular interest are those related to the American labor market, which will be published on Friday.
We have reached an important check point after the rise that began between March 7 and 9. The next point will be March 28, the expiration of an annual and monthly setup. What happens on Monday in the stock markets could affect the markets through mid-May.
The S&P500 index has made a full-bodied rise this week coming very close to the top of resistance 4,505-4,543. At this point we can expect further uptrends, unless there are sensational sell-offs.
Intermediate resistance 4,550-4,576. Above 4,596-4,613 the monthly trend will be bullish again; in case of breaking the next targets will be 4,717 and 4,780.
The current price position is to confirm 4,400-4,426 as the key support of this uptrend. The new supports are placed in the area of 4,447 and 4,490, where we might see new rises in case of pullback. The 4507-4520 area is the key area of this uptrend, because during the next week it should become a solid support for the next uptrend, otherwise it could be a resistance in case of reversals.
Weekly support may be found around 4,371. The 4,293-4,331 area is an intermediate support. We will watch 4,182-4,215 and 4,113, because if we lose them we will have a quick closure of the gap in the 4,000 points area.
How to move? We expect a bearish sideways phase between Monday and Tuesday and then a bullish phase until Friday. This forecast could undergo a change between Monday and Tuesday, and then lead to new declines instead of a bullish phase. Therefore the first two days of the week should be monitored very carefully.
DE40 – The German index got stuck in a wide range, between the key resistance 14,547 and the support 14,200-14,141. Last week’s technical expirations brought this laterality.
The resistance 13,924 becomes the weekly support; from this level we accumulated important purchases up to the key support at 13,690 area. New supports at 14,290-14,239 and confirmed 14,200-14,141. Particularly important this last area, under which a fast decline can start with first target the support 13,924.
The resistance in the 14,547 area remains in force. The latter constitutes the level that the Dax needs to recover in order to have lasting uptrends and, therefore, remains key for the fate of the German index.
The next resistance is located between 14,810 and 14,899. A recovery of the zone of 15,261 first and 15,380 then, can offer a bullish cue up to the resistance 15570, where we will check the possibility of a new attack of the weekly resistance 15,665. 15,261 is easily reached this week.
Intermediate resistance at 15810 and new bullish strength above 15944. Finally, a break of resistance 16079-16136, will offer the possibility of seeing key resistance 16230, from which to target the 16,300-16,500 area.
Should the Dax fall below 13,690, the intermediate supports we will have in 13555 and 13442 area, below which it can push hard and go for the following support in 13,200 area. From here the price has no obstacles until 12,955 and here it can also rebound strongly.
The monthly support we place in the area 12,900-12,860. Key support in the area 12,700, area that has shown its strength with the rebound of last week and that is vital for a possible accumulation phase. Confirmed the 12,5001-,12435 area as annual support. Extensions to 12,155 and 11,766.
If by next Friday prices remain above 14,141, we will see a possibility of a bullish reversal; below 13690, however, the weekly trend may push forcefully down.
US30 – The Dow Jones also suffered a heavy laterality, however, managed to reach the resistance placed in 34,930 area, oscillating between this resistance and the support placed in 34,250 area.
34930 must be followed, because here we can witness new heavy sell offs if we do not go further with volumes and verticality.
A weekly positioning of prices above 35,599-35,963 (reachable this week) will offer a new bullish directionality; 35,277 and 35,614 are the levels on which prices can restart to the upside or push down again. This requires us to constantly monitor prices at these levels.
A movement that will cross the 36,529 and that will maintain this level, will offer the possibility to see the 37,000 area if the prices will strongly break the last resistance located in the 36,786 area. Above 36,236 we maintain the possibility of further bullish volumetric thrusts.
New supports in 34565-34,458 area. Weekly support at 34,303 area and confirmed 33,886. Up to 34,303 prices have many obstacles that can be broken down only in case of sell off. Broken this level we can see some downward acceleration. Possible extensions to 33,726 from where we start to have strong volumetric areas, with peaks at 33,521 and 33,378. All excellent areas to search for long entries. Below 33,378 we could quickly attack 33,265- 32,956, key support from where this rebound started.
Support is confirmed at 32,813 area and the key support remains at 32,636-32,566 area. Losing this level might lead to new heavy declines.
Other supports at 32,308-32,215 32,137. Only below it we can see stronger bearish pressures, with possible structural trend changes. First targets in area 31,973 and 31,567.
IMPORTANT NOTE: The market has made a violent reversal, so it is advisable to buy any pullback, especially those that will touch the key supports. If the inflation and labor market data do not change the weekly bullish trend, it will be impossible to try shorting (multiday). Therefore, it is good to go in favor of the trend.
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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