DAX 40 & DOW JONES: weekly analysis 13th – 17th February

Market movers

The week ended in the red on European and US markets, with fears of continued monetary tightening by the Fed spooking investors. These days saw many more quarterly reports, which caused some fluctuations in the major indices.

Corporate data releases in the US and Europe will continue next week, with names such as Airbnb, Coca-Cola, Roku and Palantir likely to generate much volatility in their respective stocks.

However, macroeconomic data will also focus the market‘s attention, including US inflation (Tuesday 14) and retail sales (Wednesday 15), which could provide helpful information on the US central bank’s next moves.

Weekly analysis and market scenarios for DAX and Dow Jones

Last week we witnessed a significant correction in equity indices in line with Februarys seasonality, which has seen declines since the middle of that month.

This week the market will remain somewhat sideways, with a likely bearish trend, with manipulation before and after the inflation figure through the options market.

Until the beginning of March, any bearish movement will be a precursor to new rises unless specific monthly supports are broken down firmly on a weekly basis.

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

We have repeatedly explained that equity prices tend to move at least 6/9 months earlier than the business 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 form: the low should be posted in January or during Q1, and the high during Q4. Average market returns of up to 20-25%.

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

The S&P500 index last week unsuccessfully attempted our resistance 4182-4202 and then retraced heavily on Thursday and Friday, touching weekly support 4089-4080-4067 and closing in the 4099 area.

If prices remain above 4119, weekly support, the index can continue to look for bullish targets for monthly reversal, i.e. the closing of the gap of 22 August 2022 4221-230 and 4258.

New support in the 4094-4090-4081 areas. The loss of this level may lead to a sharp fall, given the speed of the previous rise. Below the 4066 mark, we can find the 4040 mark and the confirmed supports 3999, 3968-3975 and 3949, which is the weekly support. These levels are ideal for intraday and multiday buying. 3930-3918-3907 remains a crucial support area. Confirmed 3893-3887, 3863 and 3834-3844. Critical support in the 3808-3798 area, below which prices could start a new downward spiral.

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

3762 and 3711 are the monthly levels that support the current uptrend, so beware of any breakout of these levels: we could see new and heavy declines.

The psychological support 3600 remains crucial. Support around 3644-3651 points has halted the fall and is now the monthly support after this strong uptrend. Prices should not return around that area again to avoid new heavy bearish pressure. Notable levels below it are 3607, 3557-3547, 3538-3524 and 3514-3507. The 3485 support is now the annual, key 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.

In addition to resistance 4154-165, without whose recovery the index will not turn bullish on a weekly basis, prices formed significant walls in the 4144-4139-4134 and 4122 and 4113 areas, ideal levels to look for new short entries.

We can find confirmed resistances in the 4258 and 4393-308 areas. Other resistances are around 4313-4339, 4396, 4415-4451, and 4480.

The 4506 and 4554 are the resistance levels to be broken to see the downtrend that began in April 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 on a monthly basis; the following targets remain 4717 and 4780.

How to move？ The weekly high should be posted on Monday and the low on Friday. A rebound should be attempted between Wednesday and Thursday before giving way to new profit-taking. Everything will depend on the markets‘ reaction to Tuesday’s inflation figure.

DE40 – The German index managed to break through the 15578 resistance of 16 February 2022 again this week, almost touching the weekly resistance around 15665 and thus the new annual highs, only to collapse vertically for the rest of the week.

New support in the 15351-281 area and confirmed supports at 15202-114 and 15086-035. The 14967 area again confirmed the validity of this important support zone, which remains weekly. 14939-14916 and 14814-712 confirmed.

Intermediate supports around the 14138-184, 14342 and 14414-538 areas. The monthly resistance around 14810-899 has been broken down, so the Dax may start a medium-term reversal.

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

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

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

Intermediate 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 looking for long pullback entries. 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.

Confirmed supports are in the 11875-11950-12024 area, 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; below it, extensions to 11650 and 11542. The 11095 mark could be a target in case of a massive sell-off. These levels can be seen as annual reversal points.

New resistance in the areas of 15415-471, 15528, and 15583-659 becomes the area to be broken to overtake the weekly resistance around 15665.

An intermediate resistance is around 15810, with a new bullish strength only above 15944

Finally, a break of the resistance area around 16079-16136 would offer the possibility of a stretch toward the critical resistance 16230, from which to target the 16300-16500 zone.

If by next Friday prices remain above 15528, we will see a possibility of a bullish continuation on a monthly basis; below 14989, on the other hand, the trend may push forcefully downwards.

US30 – The Dow Jones index experienced a week where it tried several times to break through the resistance zone 34161-267, only to close on Friday near support 33432-580.

Confirmed supports placed in two well-bought areas: 31197-497 and 31536-764. The 32000 area is the psychological support. Other support areas are 31885-32064, 32118-211 and 32254-316, which are excellent for buying opportunities.

Support areas 32415-360 and 32546-624 are confirmed, and we can find new support in the 32696-810 area. The 32870 mark remains the weekly support.

The zone of 31036-31125 offered a new upward price turn. Confirmed support around 30953-815, 30715-614, 30559-381, 30253-136 and 29696-29906.

The 29485 mark remains a critical level. Below it, in addition to 29619-529 and 29338-29264, we have the following confirmed support areas: 29159-28876 and 28800-28685. These are all excellent supports to look for long opportunities. Should they all be pierced to the downside, prices could move toward 28319, 28051, 27765, and 27019 in extension.

Support zones in the 32872-975-33097 and 33136-252 areas are confirmed. The latter is not to be missed to continue a strong uptrend. Weekly support is around the 33364 mark, and monthly support is around the 32870 mark.

Confirmed support in the areas 33432-580 and 33681-823 are particularly packed with buyers and will be our most important defences against further declines. Next relevant areas: 33674-740, 33800-883 and 34052-131. Key 34246, which will be our weekly resistance. Confirmed resistances in the 34348-498, 34607-706, and 34801-34950 areas will be our targets next month.

Monthly positioning above 35599-35963 could offer a new bullish direction; 35157 and 35614 areas are significant because they may lead to either direction extensions. Observing this area is extremely important.

A move through 36529 and holding that level would offer the possibility of 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.

IMPORTANT TO NOTE: The retracement has arrived. We have to follow the ongoing movement. Watch out for what happens on Tuesday. It could also lead to a new trend change.

Also this week, it is wise to note Monday‘s openings and Friday’s closings for confirmation or denial of the current trend. Avoid overtrading and watch for volatility imparted by HFTs. Mark any gaps that may also appear during the week, with particular attention to those on Monday.