Last week the stock markets managed to close near Friday, April 22 levels, maintaining a strong bearish pressure.
Some pullback succeeded during the week thanks to the publication of the quarterly reports (both U.S. and European) and the Chinese government’s stimulus to boost the economy. However, the inflationary pressure, the aggressive policy of the FED, the increase of the tensions in the Ukraine conflict and some quarterly reports that did not meet the expectations (like Amazon), pushed the stock markets further down.
Next week we will have many important macroeconomic appointments. First of all the meeting of the FOMC, the operating committee of the Federal Reserve, which is expected to increase interest rates in the U.S. by 50 basis points taking them from the range 0.25%-0.50% to the new range 0.75%-1%. It will be very interesting to see if there will be any indication of the central bank’s next moves. In fact, the market already expects a monstrous increase in the June meeting (50-75 bps). Other macroeconomic data of particular importance are: the PMI indices in Europe and the non farm payrolls in the U.S.. Among the quarterly reports we highlight Pfizer, AMD and Royal Dutch Shell.
These are decisive moments for the stock markets. If there are no sudden recoveries of the stock markets, the scenario that sees the formation of new annual lows will be realized.
The S&P500 index, after having tried for three sessions to break the 4303 area, attacked the key support area 4182-4215, knocking it down and recovering it continuously until Friday afternoon, when the bearish pressure took over and the prices closed very close to the key support 4113.
The new intermediate resistance is located in the 4285-4303 area, whose recovery will ensure new bullish strength in the prices. If the prices will not be above this area on a daily basis, any recovery attempt will be short-lived.
Confirmed intermediate resistances: 4313-4339, 4396. 4415-4451 AND 4480.
The weekly trend will remain bearish as long as we do not see a close above 4506 by next Friday. If prices do not stay above 4506 again this week, the market will at least continue a slow descent.
The 4506 and 4554 remain, therefore, the resistance levels to be broken down to see a new bullish attempt. The 4580-4590 is the area to overcome, in order to try to break down 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 4135 and 4113, because if we were to lose them violently we will have a quick closure of a gap in the 4000 points area (keep in mind 4070 for possible pullbacks).
To be monitored in case of breaking of 4000 points, the levels 3964 and 3921. Key 3866, which could decree the annual minimum.
How to move? Monday maximum and Friday minimum. From day to day we will monitor the parameters to understand if the projection will be respected or not. There is strong indecision and there are several graphical and geopolitical elements that make the context really fluid and evolving. Anything could really happen.
DE40 – The German index tried this week to break the monthly support placed in 13690 area, reaching beyond but for a very short time. From Wednesday onwards, following the U.S. indexes, a strong recovery started, closing on Friday in the 13924 area.
The weekly resistance to break down is the one from last week, in the 14157-089 area. New intermediate resistances are in the 14060 area and confirmed the 14319-239, 14350-398 areas. The latter, if recovered on a weekly basis, can offer a new bullish force. Confirmed the monthly resistance in the 14810-899 area.
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 a firm point, although after this vertical fall it is very likely to see it abandoned; from this level important purchases have accumulated up to the key support placed in 13690 area. New support at 13780.
If the Dax should fall below 13690, the intermediate supports we will have again in the 13555 area and then the 13442, below which it can push hard and go to look for the following support in the 13200 area. 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 a strong pullback and that remains vital to avoid new annual lows. Confirmed the 12500-435 area as annual support. Extensions to 12155 and 11766.
If by next Friday the prices will remain above 14319, we will see a possibility of a bullish continuation; below 13924, instead, the weekly trend can push strongly down again.
US30 – The Dow Jones, like the other US indices, continues to suffer from strong bearish pressure. Where it touched the 34134 area on Tuesday, we witnessed a strong fall, touching the key support area 32956.
New weekly resistance at 33779 area and intermediate resistance at 33509. Confirmed the resistances 35157-34850, 34437 y 34237. The 33265- 32956, are also 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 located in the 36786 area. Above 36236 we maintain the possibility of further bullish volumetric thrusts.
Support confirmed in 32813 area and remains key support in 32636-566 area. Losing this level could 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 waiting for the monetary policy meeting this week. If Powell can communicate a minimum of easing, the market can go much higher. If not, we will continue with downward pressure, looking for new yearly lows and support from which to start accumulating again.
Also this week it is wise to note Monday’s openings and Friday’s closings, to have confirmation or denial of 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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