A difficult week for equity markets, which are unable to continue last week’s substantial gains. Investors’ concerns about slowing economic growth and inflationary pressures are growing.
Next week’s primary focus will be on the ECB Governing Council meeting, which is not expected to change monetary strategies but to give further indications on the next steps. Christine Lagarde and Philip Lane have announced that the government bond purchase plan will end in July, and interest rates will turn positive again in September.
Another macro element to watch with particular attention is US inflation, which could be decisive for the Federal Reserve’s decisions. Markets probably believe that Powell and the other central bankers should proceed with three hikes of 50 bps in the coming meetings and two hikes of 25 bps in the last meetings of the year.
A negative week comes to a conclusion, but the underlying trend in multi-days remains positive. The following two trading days are going to be crucial. Will the stock market’s upward trend continue, or will new selling begin? It’s not a foregone conclusion that the response will be yes.
The S&P500 index, after having touched the 4200 resistance on Monday, failed to go beyond it. Every approach failed (purchases were not enough to break through the resistance), and the index closed at around 4100 points but showed no signs of breaking through.
The target remains the breaking of the resistance located in the 4200 area from where prices can stretch directly towards the key 4285-4303 area, whose recovery will guarantee a bullish reversal on a weekly basis. The recovery of 4168-162 may give the first signal of upward thrust.
Other resistances: 4313-4339, 4396. 4415-4451 and 4480.
The 4506 and 4554 marks are the resistance levels to be broken down to see the fall that began in April reversed. 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 at 4717 and 4780.
New supports in the 4085-4107 area; this area must not be lost to avoid new bearish pressures. Confirmed supports area 4038-4065 and 3991. Weekly support 3945. The 3991 and 3945 should be monitored because they could lead to heavy downward acceleration if broken down.
Supports in the 3861 area and 3830-3822-3808 area are maintained. Losing this last level could lead to new declines in 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? It is a time to check the annual forecast. Next week will be a decisive week, as it will become clear whether the yearly downturn is really over or not.
DE40 – The German index, while holding above 14282, failed to stay above the critical 14546 area, from where a new uptrend can start. The price closed Friday very close to this level, still giving the possibility of a break-up.
The level to hold this week is the 14538 level. The price has practically no obstacles, except the psychological level of 14600 already touched, and can look for the monthly resistance in the 14810-899 area.
Recovery of the 15261 area first and 15380 then may offer a bullish impulse up to the 15570 resistance, where we will test the possibility of a new stretch on the weekly resistance 15665.
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 to target the 16300-16500 area.
New weekly support in the 14260-298 area. Hold of 14424-474 to be checked as a basis for bullish continuation. Intermediate supports at 14172 and 14095-130.
Confirmed 13970-14053, 13760-840, 13716 and 13523. A key area is around 13300 because below it, the price has no obstacles until 12955, and there it can rebound strongly again.
Monthly support is in the 12900-12860 area. Significant support is around 12700, an area that has shown strength with a strong pullback and remains vital to avoid new annual lows. Confirmed the 12500-435 area as yearly support. Extensions to 12155 and 11766.
If by next Friday, prices remain above 14260, we will see a possibility of a bullish reversal; below 14172, on the other hand, the weekly trend may push downwards again.
US30 – Despite a lot of important news, the Dow Jones remained locked in a narrow weekly range after touching historical resistance 33509-779 on Monday. Similarly, after touching support in the 32495 area, the index turned strongly to the upside.
The turning level between long and short is in the 32950 area. Above it, prices can return to the 33100-33314 area, from where they can start towards our resistance 33509-779. The real goal is to return to the levels of the beginning of May in the 34134 area, from where a more consistent reversal would start.
Resistances 35157-34850, 34437 and 34237 are confirmed.
A monthly positioning of prices above 35599-963 will offer a new bullish directionality; 35157-34850 and 35614 are the levels at which prices can either restart to the upside or push back down. This requires monitoring prices at these levels constantly.
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.
IMPORTANT NOTE: the situation is so entangled that sometimes you don’t know who to listen to. The only one to listen to is the price. Key levels help to understand how to move. This way, the margins for error drop dramatically.
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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