DAX 40 & DOW JONES: weekly analysis 5th June – 9th June

Market movers

The week ends with the stock exchanges experiencing a bullish resolution, thanks to the agreement reached on the US debt ceiling and the possibility of a pause in the hike cycle perpetuated by the FED as early as the meeting on 14 June. The rollover period starts this week in combination with other relevant macroeconomic data.

Earlier this week, European and US PMI Services data will be released. Especially the PMI services drafted by the ISM are expected to increase at a slower pace to 51.5 for May. Therefore, inflation should continue to decline.

Recent data on China indicate that the post-pandemic recovery is losing its initial momentum. Economic data released during the week, especially on imports, will help shed more light on domestic demand.

Central banks of Australia and Canada will announce their interest rate decisions. Japan, on the other hand, will release the GDP data.

Finally, oil could experience a certain period of volatility, given the OPEC+ meeting scheduled for Sunday, where it will be discussed further production cuts.

Weekly analysis and market scenarios for DAX and Dow Jones

The month of June should post an acceleration for the equity markets. The most important week of the month will be the third one, when we will have both the rollovers and the FED meeting. If the markets will retrace during the week, we will have a high chance of a bullish rally.

This month has an 80% probability of posting higher peaks than the ones recorded in May. From now on it will be possible to reach a percentage of 5% in profits and even more.

The medium-term trend is still bullish. The indexes are posting new annual highs (such as the Nasdaq) and these new highs are the confirmation of the solid continuation of the current bullish movement. This bullish movement will take place thanks to the seasonality, which will deliver upward lunges until August.

Beyond the rhetoric of the debt ceiling, the recession, and the banking crisis, only a strong flip in sentiment could lead to a trend reversal. Earnings of US mega caps have shown off and many other companies are also ramping up the increase in revenue.

The average annual returns on international equities (World Stock Exchanges based on GDP) are around 11%. Current rates in America are about 5%. With a projection for 10, 15, and 20 years, equity markets always beat bond markets. Therefore, we should be at the starting point of a 10-year bull market.

Rising interest rates wont directly and inevitably lead to a recession. As long as these hikes are balanced with economic growth, there should be no danger. On the other hand, an exaggerated rate cut could drag down the markets for a long time.

The likely lows in October 2022 will have a high probability of remaining so for many years. They could represent the lows of the entire decade. Despite some short-term overbought, the markets are unstoppable and will be so for a long time. Here is why.

It has been highlighted several times that stock prices tend to move at least 6/9 months before the economic cycle. For this reason, during the final part of 2022, the markets would have posted a significant bottom between June and October and then taken off again for the long term. The prices marked during the year had discounted the most unfavourable geopolitical and geo-economic conditions.

During 2023 we expect the following pattern to emerge: the low should be posted in January or during Q1 2023, and the high during Q4. Average market returns up to 20-25%.

As always, we will confirm the annual forecast from time to time.

Last week the S&P500 closed the gap of 22 August 2022 in the 4221-230 area then pushed upwards and touched 4258. Finally, it managed to close the week just reaching our first annual target in the 4293-4208 area.

New supports in 4283-4279, 4268-4260, and 4249 areas. These levels are very easy to be pierced in the case of downward acceleration, particularly 4249. From this latter level, we could easily reach the 4227-4223 area, where volumes manage to concentrate for Fridays lunge.

Below 4223, there are high chances for further drawdowns targeting the supports at 4204 and 4196-4190. 4177-4170 becomes the new weekly support.

Confirmed the supports in 4153, 4144-4140, 4124-41and 17, 4100 areas. The loss of the latter support could lead to heavy drawdowns.

Confirmed supports in areas 3930-3905-3899, 3945-3957-3961, 3979, 3993-4000, 4032-4043. 4064-4075 is still the key support.

3890-3879 is the critical zone because, in this specific area, buyers managed to concentrate. Additional support in 3864-3857 areas. Another intermediate zone is located in the 3822-3814 area.

Support in the 3808-3798 zone was confirmed, below which prices could start a new downward spiral.

Support around the areas 3669, 3680-3689-3701, and 3711-3726-3733 are confirmed.

3762 and 3711 are the monthly marks that support the current uptrend, so beware of any breakout of these levels: we could witness a new trend inversion.

The psychological support of 3600 remains crucial. Support around 3644-3651 marks has halted the fall and is now the monthly support after this solid uptrend. It shouldnt be touched again, to avoid new and heavy downward movements. Below is the 3607 level. Then again, the 3557-3547, 3538-3524, and 3514-3507 are support levels. The 3485 support is now the annual, critical, and historical level for the S&P500 index. We will test whether this last level could stop, at least in the medium term, the bearish direction of the markets. Should we go beyond it, 3200-3300 will be the target, sought after by funds, investors, and traders halfway around the world.

Resistances were confirmed in areas 4293-308. Other resistances are located in 4313-4339, 4396, 4415-4451, and 4480 zones.

The 4506 and 4554 are the resistance levels to be broken to see the downtrend that began in April 2022 reversed. The 4580-4590 is the area to overcome to break down the monthly resistance in the 4613 area.

A weekly close above 4613 may guarantee a reversal of the annual trend if confirmed monthly; the following targets remain 4717 and 4780.

How to move？ The week should start with a retracement, and this movement should last till the early trading hours of Tuesday, and then accelerate to the upside. Only a strong sell-off and the breaking of the weekly supports will be able to reverse the trend.

DE40 – Last week, the German index managed to recover some gains after the latest sell-off, closing on the 15989-16050 resistance and after testing the weekly support in the 15733-687 area.

New supports in 16050-15989, 15952, 15878-830 and 15803-746 areas. The weekly support located in the 15733-687 area was confirmed. Support zones 15657-603, 15652, and 15538-510 are confirmed. Below the latter level, prices can create a robust downward acceleration. On the other hand, if those levels wont trespass, we could witness an important restoration in price levels.

Supports in areas 15439, 15368-308, 15287-247 are confirmed and followed by 15152-196, 15247-287, and 15308-368. These zones represent the strength of the ongoing rally and must be held for it to continue the movement.

Support in areas 14957-14844 and 14737-603 are confirmed. This support becomes the weekly level for new upward movements or heavy drawdowns.

Intermediate supports were confirmed at 14138-184, 14342, and 14414-545.

New critical zone in the 13814-781 area. The loss of the volumetric zone 14069-13974 opens the way to monthly support in the 13621 area.

Monthly support in the 13621 area. The Dax left a huge volumetric gap after the FEDs inflation figures, easily penetrated at the loss of 13975.

Solid supports in the 13692-608, 13550-516, and 13457-410 areas. Confirmed support is around 13314-333, 13331-410, and 13438-467.

Volumetric supports are confirmed in the 12865, 12833-12909, 12978-13038, 13113-178, 13222-280, and 13307-357 areas.

Support in the 12808-766 area is confirmed. From 12628 to 12766, there are a series of intermediate supports, helpful for long entry from pullbacks. 12566 becomes monthly support.

Other key supports are 12407-517 for volume concentration and 12353-275, the first bullish turn zone. Confirmed supports in the 12223 and 12136 areas.

It was also confirmed support in the 19920-15006 area. This is 11875-11950-12024, which halted the price fall after the US CPI data on Oct 13th. Losing it would mean new bearish pressures and a touch of the weekly support in the 11766 area; extensions to 11650 and 11542 below it. The 11095 mark could be a target in case of a massive sell-off. These levels can be seen as annual reversal points.

Resistances in areas 16121-237 are confirmed. The break of 16327 would open to further upward lunges toward the final target in the 16500 area.

If by the following Friday, prices stay above 16050, we could witness a chance for a continuation of a bullish movement every month; below 15687, the trend will move strongly downwards again.

US30 – This week, the Dow Jones reached the weekly resistance placed at 33662-786, after a fast and vertical upward rally.

New supports in 33682-624, and 33559-434 areas. The break of these levels could lead to a strong movement to the downside. Other supports in 33305, 33216-039, and 32975-858 areas. This whole zone is the new weekly support. Underneath it will be possible to witness new bearish accelerations. Other supports in the 32804 and 32725 areas.

Additional supports in the following areas: 32499-632, the loss of which could lead to a monthly trend reversal. Next supports: 32801-875, 33945-990.

Confirmed supports are placed in two well-bought areas: 31197-497 and 31536-764. Other support areas are placed at 31753-920, 32111. The 31861 level remains a key one.

31036-31125 is the critical support for the monthly level. Confirmed support around 30953-815, 30715-614, 30559-381, 30253-136, and 29696-29906.

The 29485 mark remains a critical one. In addition to the 29619-529 and 29338-29264, the support zones 29159-28876 and 28800-28685 are again confirmed. These are all excellent supports to look for long entry opportunities from pullbacks. Should they all be pierced to the downside, prices could move toward 28319, 28051, 27765, and 27019 in extension.

The critical marks are 34143 and 34192 finally became weekly resistances, from here can start new vertical lunges. New resistances in area 33734-33815. Confirmed resistance is located in the 33840-898, 34000-048, and 34130-203 marks. Confirmed the resistances in areas 34330, 34498, 34607-706, and 34801-34950, which will be our target for the month.

Monthly positioning above 35599-963 could offer a new bullish direction; 35157 and 35614 areas are significant because they may lead to either direction extensions. Monitoring this area is extremely important.

A move through 36529 and holding that level would allow seeing area 37000 if prices forcefully break the last resistance placed at area 36786. Above 36236, we maintain the option of further bullish volumetric thrusts.