S&P 500, Nasdaq, Dow Jones, DAX Forecast for the Week Ahead


Indices Technical Forecast: Neutral

  • Stocks put in an enormous transfer this week and the S&P 500 and Nasdaq each broke above falling wedge formations, usually tracked for bullish reversal potential.
  • The Dow has been strongest, with the S&P 500 lagging behind and the Nasdaq behind each; till the previous two days when the script shifted and the Nasdaq led the manner.
  • The forecast for subsequent week will likely be set to impartial. There’s bullish short-term potential and bearish long-term potential; however the prospect of a deeper brief squeeze can maintain bears at bay for the time being.
  • The analysis contained in article depends on value motion and chart formations. To be taught extra about value motion or chart patterns, try our DailyFX Education part.

Recommended by James Stanley

Get Your Free Equities Forecast

We’re at a wierd juncture for capital markets. It appears that the Fed nonetheless needs to see asset costs reacting to fee hikes however, just like what occurred in June and July, markets maintain rising whilst the Fed warns of extra hikes on the manner and an unfinished battle in opposition to inflation. The motto of ‘don’t battle the Fed’ has been in a very peculiar state of late, as Chair Powell took a moderately direct tone to the matter at the fee choice earlier in November and but, shares discovered help a few days later and continued to rally by means of final week, even with one other elevated inflation print that claims that the Fed in all probability isn’t performed but.

I’m nonetheless bearish US equities on a long-term foundation. The rationale being that the Fed needs to see asset costs move-lower in effort of stemming inflation, and the kind of response that we noticed final week means that there’s nonetheless appreciable extra left to deal with. And with the Fed exhibiting a latest tendency in the direction of extra hawkish feedback after equity markets have risen, we could also be in a spot the place Fed-speak takes on a more-hawkish tone sooner or later in the not-too-distant future. This could be just like Powell’s method at Jackson Hole, when he took a shorter and more-pointed message to markets.

But, technical analysis doesn’t care about emotions or opinions, and what charts are exhibiting at the second is that there could also be extra life to those rallies earlier than bears are able to take over once more. How a lot stays the huge query however with each the Fed and CPI in the rear-view, these dominant drivers are going to take a again seat and the consideration will shift in the direction of Fed-speak in the US as market members look for hints on forward-looking Fed coverage.

On a shorter-term foundation, there’s scope for continuation, even after a very robust exhibiting final week. The S&P 500 broke out of a falling wedge formation, usually tracked with intention of bullish reversals and just like what had confirmed again in June earlier than the two-month-rally appeared. The Dow has led the manner, though the Nasdaq outpaced in the latter portion of final week. That might counsel that the rally is making ready to hit one other stage as short-covering in tech shares brings one other attainable bullish catalyst to the laggard amongst US indices.

Nasdaq 100

Just every week earlier the Nasdaq was digging right into a long-term help zone. That was the Friday after the FOMC fee choice and I’m monitoring the zone between Fibonacci ranges at 10,501 and 10,751. The former degree got here into play in October and presently helps to mark the yearly low. The latter degree got here into play in early-November and functioned as a higher-low. That’s led to a push as much as a recent higher-high, with value testing by means of a key spot of resistance round 11,700.

Nasdaq 100 Weekly Chart

Chart ready by James Stanley; Nasdaq 100 on Tradingview

Nasdaq Shorter-Term

From the day by day chart, we are able to focus in on the wedge break. The resistance trendline is taken from August and September swing highs, the projection of which had caught the late-October excessive. Falling wedges are sometimes tracked with the intention of bullish reversals, largely introduced upon by the proven fact that sellers didn’t stretch value motion upon exams of recent lows, and that’s what we’ve seen with the minimal extension from the June low to the October low.

This places deal with the longer-term trendline, in purple beneath, which initiatives to round 12,600 in the Nasdaq 100 for subsequent week.

Nasdaq Daily Chart

Nasdaq daily chart

Chart ready by James Stanley; Nasdaq 100 on Tradingview

S&P 500

The S&P 500 put in a rally to the 4k psychological degree, and this rather less than a month after an enormous help take a look at at 3500. But, just like the Nasdaq, there was a falling wedge that had constructed off of that commentary and that was broken-through final week on Thursday. And the prior week even had a large open door for bears following a maintain at that trendline and the construct of a bearish engulfing sample.

The proven fact that shares not solely didn’t proceed that transfer decrease, and as a substitute put in a powerful rally-higher speaks proper to that phrase of ‘if stocks don’t sell-off on unhealthy information, there’s in all probability one thing else happening.’

My guess on the ‘something else’ is sentiment-related, and that in all probability has one thing to do with choices exercise. Put-call ratios have had an inclination to widen out as costs push to lows, and people have been large contrarian alerts of late as market makers then have incentive to push prices-higher to seize that put premium. In my opinion, this explains why there’ve been so many brief squeeze varieties of situations over the previous few months, which has helped to result in the construct of these falling wedge formations. And, in-turn, it’s hindered the Fed’s plans to a level.

But, it’s value saying once more, the chart doesn’t care about opinions and this recent breakout has produced a higher-high after final week’s greater low.

Recommended by James Stanley

Building Confidence in Trading

S&P 500 Weekly Chart

SPX weekly chart

Chart ready by James Stanley; S&P 500 on Tradingview

S&P Shorter-Term

On the beneath chart, we are able to focus in on that 4k resistance take a look at which helps to mark the present higher-high. This additionally opens up help potential at a key zone, spanning from 3802-3820, and that basically simply illustrates how aggressive final week’s bullish response was. Between present value and that zone is one other space of attainable higher-low help, and that plots round the 3900 deal with.

On the topside of value motion, there’s a bearish trendline that initiatives to the 4100-4139 zone for subsequent week. Above that, a well-recognized space round the 4200 mark seems.

S&P 500 Daily Chart

SPX daily chart

Chart ready by James Stanley; S&P 500 on Tradingview

Dow Jones

The Dow was up as a lot as a whopping 18.67% from the October low final week. This outpaces the most transfer of 15.54% that confirmed in June, and notably, that was lower than the Nasdaq’s 24% rally over the identical time frame.

The proven fact that the Nasdaq had jumped extra in June illustrates that this was in all probability short-covering-related. But, with the most up-to-date iteration of bullish conduct, the proven fact that the Dow outpaced signifies that there was some official bullish accumulation right here. And if we take a look at the contextual backdrop of upper charges and the Fed speaking up the prospect of holding charges in restrictive territory, it is sensible as to why the Dow would outperform: It’s much less rate-sensitive than the tech-heavy Nasdaq.

But – the proven fact that the Nasdaq began to outpace each the Dow and S&P on Thursday and Friday of final week means that there could also be some short-covering coming into the equation, and that is one thing that may be equally impactful to each the Dow and the Nasdaq though it might in all probability have a higher affect on Nasdaq value motion.

On a technical foundation, the Dow took out a serious trendline final week, which related January and August swing-highs. An tried pullback on Friday was lower brief, as help confirmed up at the resistance swing from the August twenty sixth excessive, additional illustrating bullish conduct. The subsequent main spot of resistance sitting overhead is round the August excessive, simply within the 32,500 psychological degree. There’s help potential at the identical 33,444 degree that got here into play on Friday however there’s one other zone that seems a bit extra stable round 33,000-33,106.

Given the Friday doji, mixed with the proven fact that the Dow has already put in a large transfer, warning is warranted right here from chasing. But, institution of higher-low help can maintain the door open for bullish continuation situations.

Recommended by James Stanley

Trading Forex News: The Strategy

Dow Daily Chart

Dow daily chart

Chart ready by James Stanley; Dow Jones on Tradingview


While US equities have been clawing again from the mid-October low, the DAX is now in a technical bull market after leaping by greater than 20% from its October low.

And the transfer has priced-in very cleanly, too, with a longer-term falling wedge formation main right into a breakout round the ECB fee choice in late-October.

There was even a pullback, re-load setup right here, when costs pulled again to wedge help, proper at a confluent zone of Fibonacci ranges after the FOMC fee choice. At this level, the transfer seems near-parabolic on the day by day chart and this has tones of aggressive short-covering in the DAX. The index is up greater than 10% from that low in the prior week, and it was already aggressively-bought earlier than that higher-low confirmed up. This signifies higher unwind from longer-term brief positions.

And this will likely have some relationship with bigger themes round the Euro as worry continues to dissipate. While a lot of the summer time was wrought with worry of what winter would possibly convey, hopes have began to shift that Europe could possibly get by means of the winter with out an excessive amount of affect from the ongoing battle in Ukraine. That, in fact, stays to be seen, however the response in the DAX is notable and technically, the index is pushing right into a recent bull market with costs greater than 20% over the prior October low.

Recommended by James Stanley

Download our Euro Forecast

DAX Weekly Chart

DAX weekly chart

Chart ready by James Stanley; DAX Futures on Tradingview

DAX Shorter-Term

The DAX has now crossed the 50% marker of the 2022 sell-off and that helps to maintain the near-term deal with energy. That value is at 14,062, which may be spanned all the way down to the August swing-high to create a help zone. A maintain there retains the door open for aggressive bullish methods, however realistically, value can dip all the way down to the 13,500 space and nonetheless retain a bullish look as the prior swing-low is all the manner down round 13k.

On the topside of value motion, the subsequent main degree is the 61.8% retracement of this 12 months’s transfer at 14,589, after which a major swing at support-turned-resistance seems at 14,909.

DAX Daily Chart

DAX daily chart

Chart ready by James Stanley; DAX Futures on Tradingview

— Written by James Stanley, Senior Strategist, DailyFX.com & Head of DailyFX Education

Contact and observe James on Twitter: @JStanleyFX

Source link


Please enter your comment!
Please enter your name here