DAX 40 & DOW JONES: Weekly analysis 18th – 22nd September

Market Trends Last week saw intensive stock market fluctuations influenced by the growing US inflation and the quarterly rollovers. The following week is likely to bring forward significant macroeconomic data, drawing attention from investors and economists alike.

On September 20, Wednesday, the Federal Reserve will declare its decision on interest rates, with speculations leaning towards no change for this period. This announcement coincides with headline inflation registering a rise for two months in a row, even as core inflation demonstrates a significant slowdown.

While inflation stays markedly above the Federal Reserve's target of 2% and oil prices surge upwards, there might be a need to consider a rate hike again before the year ends. The market is factoring in roughly a 40% chance of a rate increase in November. The decision by the Federal Reserve can be expected to steer the course of global markets. On Tuesday, we can anticipate the release of European inflation information alongside data on building permits issued in the USA.

On Thursday, September 21, the BoE will announce its rate decision and comes as mixed data makes the decision less clear-cut than in previous meetings. While inflation is cooling, it remains well above the BoEs 2% target rate.

Also on Thursday, the Swiss Central Bank will announce its interest rates decision. In the meantime in the US, we will have jobless claims and existing home sales.

On Friday it will be the Bank of Japan‘s turn. The BoJ’s policymakers are increasingly discussing the need to shift away from the ultra-easy monetary policy stance of the past decade. The end of negative rates could now be on the horizon. While no significant policy change is expected at this meeting, investors will watch for a language shift. USD/JPY continues to trade around 147.00. A less dovish-sounding BoJ could pull the pair lower.

Additionally, we will witness the Eurozone PMI data. Data from the eurozone has been painting an increasingly gloomy picture, raining concerns over the economy‘s health across the year’s second half. This weeks PMI data is likely to continue along a similar trajectory.

Weekly analysis and market scenarios for DAX and Dow Jones

The general visual perspective hasn't altered in the past fortnight. Late August saw the disclosure of a bullish trend within American stock exchanges. However, Wall Street's orientation remains undetermined, with costs persisting beneath vital resistance points. As the month's end draws near, maintaining concentration is crucial. This is due to the persisting threat of a substantial market correction, instigated by seasonality factors.

From the lows of the week of March 13, the rise of the international stock markets has been incredible. The thesis that supported a lead to a very strong climb until August 4th, the annual setup, was confirmed with almost millimeter precision. Everything occurred as we predicted, and between September 2022 and March 2023, all international markets posted their lows for the moment (which could also be the ten-year lows).

The next crucial days will be toward the end of the month, and we should monitor if we can reach this months low during the current week.

Beyond the rhetoric of the debt ceiling, the recession, and the banking crisis, only a decisive 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 more than 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.

We have 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 posted a sharp decline, after another attempt to break through the resistance located in the 4550 area, and ultimately closing in the 4499 area on Friday.

New supports in the 4493-4485 and 4471-4454 areas where buyers managed to concentrate for last weeks bullish lunge. Below this support level, a revived and strong bearish thrust could begin.

4439 and 4432-4425 are well confirmed, the level where the rise on August 29th picked up.

Confirmed 4409-4398-4387 and 4370-4355, which both become weekly. Below it, downward accelerations are possible, with the first target in the 4304 mark and filling the gap of mid-June. Confirmed the 4274-4263, and if these levels are to have trespassed, it will bring a downward acceleration toward 4249, then 4227-4223, the whole zone where volumes managed to concentrate for the upward lunge of end June.

Below 4223, there are high chances for further drawdowns targeting the supports at 4204 and 4196-4190. 4177-4170 is still a critical mark.

Confirmed the supports in 4153, 4144-4140, 4124-4117, and 4100 areas. The loss of the latter support could lead to heavy drawdowns

Confirmed the supports in 3930-3905-3899, 3945-3957-3961, 3979, 3993-4000, and 4032-4043 areas. The 4064-4075 areas remain a crucial support.

3890-3879 is still a 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.

Confirmed supports in 3669, 3680-3689-3701, 3711-3726-3733 areas.

3762 and 3711 are the monthly levels 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. The support at 3644-3651 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 monitor 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.

New resistances in the 4500 and 4510-518 areas. The intermediate resistance is in the 4525-4538 area and the weekly resistance is located in the 4557-4564 area.

Confirmed 4575-4580 and the resistance offering a new bullish lunge in the 4595-4607 area. Resistances 4617-4622 and 4629-4632 are confirmed.

The upside targets are still 4662 and 4680, beyond which important resistance levels must be overcome before reaching new all-time highs.

The weekly closure above 4613 guarantees the annual trend reversal if confirmed on a monthly basis; the following targets remain 4717 and 4780.

How to move？ We are at a turning point and we need to understand whether last weeks rally was false or it was a preparation for breaking through the weekly resistance levels. Everything is still on the table. The most critical date in September will be the 29th.

DE40 – Last week the German index posted some bullish pressure, as it attempted to break the resistances in the 15912-964 area without managing to move beyond last weeks highs. This situation remains highly unstable, and as of April 2023, it still lacks a clear direction.

New supports in 15853-781, 15732, and 15671-577 areas. 15554 and 15490-439 are well confirmed. Followed by 15152-196, 15247-287 and 15308-368 (weekly). These zones represent the strength of the yearly bullish strength and must be maintained for the movement to continue.

Supports in areas 14957-14844 and 14737-603 are confirmed. This area becomes the yearly level for new upward movements or heavy drawdowns.

Confirmed intermediate supports 14138-184, 14342, 14414-545.

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

Solid supports in areas 13692-608, 13550-516, and 13457-410. Supports 13314-333, 13331-410, 13438-467 confirmed.

Confirmed volumetric supports in areas 12865, 12833-12909, 12978-13038, 13113-178, 13222-280, 13307-357.

Confirmed the supports in area 12808-766. 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 the concentration of volumes, and 12353-275, the first bullish turning zone. Confirmed support in areas 12223 and 12136.

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 October 13th. Losing it would mean new bearish pressures and a touch of the weekly support in the 11766 area; with 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 considered annual reversal points.

New resistances in the 15871-923, 15959-992 and 16024 areas. Above the latter, new price accelerations seem to be possible.

16054-104 confirmed and became new weekly support. Breaking these levels could lead to a fast rebound up to key resistance at 16225-253, where Tuesdays 2 August gap will be filled. Additional resistances in the 16272-335 area, the breaking of which could lead to the annual highs in the 16517-475 area.

If by the following Friday, prices remain above 16104, we could witness a chance for a continuation of a bullish movement on a monthly basis; below 15544, the trend will move strongly downwards again.

US30 – Last week, the American index posted a significant pullback, as prices attempted to break the crucial resistance at 34997-35109, but with no success. On Friday prices closed in the 34642 area and collapsed southwards.

New supports in areas 34678-614, 34567 and 34521. 34425-378 confirmed. Also confirmed 34322-201 and 34159-059. Protecting these levels could result in a significant price rebound.

Additional supports in the 34000 and 33931-861 area, which become weekly.

Confirmed 33712-660 as monthly support and also 33559-434. The break of these zones could lead to bearish solid accelerations.

Other supports are placed in the area 33305, 33216-039, and 32975-858. Underneath, it will be possible to witness new bearish accelerations. Other supports in areas 32804 and 32725 are monthly supports.

Additional supports in the following areas: 32499-632, the loss of which could lead to monthly trend reversals. Following 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 still remains a key one.

31036-31125 is still to be considered critical support for the monthly level. Confirmed 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 kept. 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.

New resistance zones in the 34697-770, 34801-833, 34868-913, 34985 and 35020-050 areas.

The 35109 level is confirmed, and a breakout above it could trigger a strong rebound. Additional resistances are at 35166 and in the 35273-378-444 area.

35539-591 confirmed. At 35620, the gap of August 2nd will be filled. Final resistance in area 35673-715.

The break of this monthly resistance zone opens the gateway to the 36068 weekly target.

Monthly positioning of the price above 35599-963 could offer a new bullish direction on a yearly basis. A movement that will go through 36529, managing to keep this level, would offer the possibility of reaching the 37000 area if prices forcefully break the last resistance placed in the 36786 area. Above 36236, we keep the possibility of further volumetric upward thrusts.

Key Observation: The market has been successful in recovering vital weekly resistance levels. The month of September usually commences with a significant period of decrease, therefore, it's plausible to anticipate continued price recoveries. Please take into consideration that a surge in volatility can lead to a drastic fall in prices, hence, we will persist with shorting the equity markets. Further, in the coming week, it is prudent to pay attention to the market openings on Monday and its closings on Friday for validating or refuting the existing trend. Overtrading should be avoided and keep an eye on the volatility introduced by High-frequency trading (HFT). Noteworthy should be any possible gaps that can occur during the week, especially giving importance to those on Monday.

Enjoy your trading!