The closing week was mixed with weak signs of recovery on Thursday, the 26th, contrasted with the collapse of some technology stocks (Snap, Nvidia). Overall, however, the week proved to be one of the most positive in recent times. Friday’s PCE Core inflation figure in the US was in line with expectations at 4.9 % and thus showed signs of a slight slowdown.
Since Wednesday’s minutes, many FED members consider two 50bp rate hikes at the June and July meetings appropriate. However, some believe that, after a phase of quick and marked hikes in the summer months, the Fed is in a position to reassess the macro picture and consider pausing the hiking process at the September meeting. This means that the Fed will be more and more data-dependent from the July meeting onwards, and data on growth and inflation will become increasingly important. After this news, the indices started to rise again because the Fed might stop the rate hikes earlier than expected.
Next week, on the other hand, the spotlight will be on the Euro Zone inflation figure on Tuesday, 31 May. A higher than expected result could lead to more aggressive ECB intervention at the next meeting in July. In addition, particular caution will be paid to the US Non-Farm Payrolls data, which could influence the Fed’s interest rate decisions later this year.
Could the one-year low be over? The recovery of the weekly key levels is a powerful signal; however, it will be good to keep in mind the sensitive support levels that could lead to new declines; in general, the market is not yet in a recessionary scenario, so in the next quarter we will try to understand the reaction of the markets to the upcoming quarterly reports, especially if we arrive too high in price values at this critical event.
The S&P500 index, after approaching support in the 3861 area, broke through key resistance 4105-4121 on Friday, closing in the 4170 area. Purchases on Wednesday evening confirmed the possibility of prices turning upwards.
The next target is the resistance in the 4200 area from where prices can fly directly towards the key 4285-4303 area, the recovery of which will ensure a bullish reversal on a weekly basis.
Other resistances: 4313-4339, 4396. 4415-4451 e 4480.
The resistance areas to be broken down to see the downtrend that began in April reversed are around 4506 and 4554. The 4580-4590 is the area to overcome to break down the monthly resistance placed in the 4613 area.
The weekly close above 4613 guarantees the reversal of the annual trend if confirmed on a monthly basis; the following targets remain around 4717 and 4780.
New supports in area 4129, area 4038-4065 and 3991. Weekly support 3945. The 3991 and 3945 areas should be monitored because they could lead to new bearish pressures if broken.
The supports in the 3861 area and 3830-3822-3808 area are confirmed. Losing the latter level could lead to new declines towards the following areas: 3723-3808, 3694, 3628-3647, and 3576-3555. These areas should be monitored to evaluate positive trade opportunities (the last one should be the maximum bearish yearly expansion).
How to move? Sideways phase between Monday and Tuesday and then bullish until Friday. Only the loss of the indicated supports could lead to further selling on the international markets.
DE40 – After weeks of accumulation, the German index broke our weekly resistance in the 14282 area, closing near the key level 14546. From here, new bullish strength can begin for the Dax.
The next target is the monthly resistance in the 14810-899 area.
Recovery of the area of 15261 first and 15380 then may offer a bullish cue up to the resistance 15570, where we will check the possibility of a new stretch to the weekly resistance 15665.
Intermediate resistance around 15810 and new bullish strength above the 15944 mark. Finally, a break of resistance 16079-16136 will offer the possibility of seeing key resistance 16230 to target the 16300-16500 area.
New weekly support in the 13970-14053 area. Intermediate supports are helpful in looking for long entries: 14231 and 14380.
Confirmed supports around 13760-840, 13716 and 13523. Another critical level is the 13300 mark because below it, the price has no obstacles until 12955, and here it can rebound strongly again.
Monthly support is in the 12900-12860 area. Critical support in the 12700 area proved its strength with a strong pullback and remains vital to avoid new yearly lows. Confirmed the 12500-435 area as yearly support. Extensions to 12155 and 11766.
If by next Friday, prices remain above 14231, the current bullish tension could be maintained; below 13970, on the other hand, the weekly trend may push forcefully downwards again.
US30 – Thanks to the easing from the FED minutes, the Dow Jones benefited from a robust rebound.
On Friday, the index broke our weekly resistance in the 32690-32837 area, giving new bullish strength to the prices, taking the first target in the 33000 area and aiming at 33509-33779 (historical resistance) next week.
Resistances 35157-34850, 34437 and 34237 are confirmed.
A monthly positioning of prices above 35599-963 could offer new bullish directionality; 35157-34850 and 35614 are the levels at which prices can either restart to the upside or push down again.
A move through 36529 and holding that level will offer the possibility of seeing 37000 area if prices break strongly the last resistance placed at 36786 area. Above the 36236 mark, we maintain the possibility of further bullish volumetric thrusts.
Weekly support in the 31427-31701 area. New intermediate supports at 31930, 32277 and 32980-32631 area, helpful to look for long pullback entries.
The Confirmed support areas are around 30730-30679. If prices go below this area, there is a possibility of seeing a lunge up to the 29983 area, passing through 30374-30223. Extension to the 29119 area.
A powerful trend has started, but it can be reversed if the Fed shows excessive concern about macro data and if inflation does not fall. Perhaps we will enjoy an excellent rebound. Unfortunately, we are still missing a descent (the recessionary scenario and falling corporate profits are not a foregone conclusion), so we should be alert to any macro data published, especially next quarter’s quarterly reports.
Also, it is wise to note Monday’s openings and Friday’s closings for confirmation or denial of the current trend this week. Avoid overtrading and watch out for volatility imparted by HFTs. Mark any gaps that may also appear during the week, paying particular attention to those on Monday.
Enjoy your trading!
Research provided by Giancarlo Prisco
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