Weekly Technical Forecast for Dow, S&P 500, FTSE 100, DAX and Nikkei

  


Weekly Technical Forecast for Dow, S&P 500, FTSE 100, DAX and Nikkei

S&P 500, Dow Jones Charts – Beware of Steep Decline Even if the Worst is Over

Global Markets Refocus Attention on Trade Wars and Brexit

– Are you looking for longer-term analysis of Equity prices? Check out our Quarterly Forecasts as part of the DailyFX Trading Guides.

Recovery Rallies Begins to Unravel

The November recovery in equities began to sputter this week, and as I’ve been following over the past month, geographical limitations continue to apply. While stocks in the US showed a robust bullish move in the early portion of this week, a bit of trepidation remained in European bourses as the oncoming showdown between Italy and Brussels weighs heavy on market participants’ minds. Japanese stocks started the week strong, but ended with a whimper as most of the prior gains were given back to produce a doji for the week on the index.

In the US, the big point of differentiation in this week’s price action appeared to be derived from the Thursday rate decision at the Federal Reserve. Recovery rallies in both the Dow and the S&P 500 were stopped dead-in-their tracks around that rate decision, and Friday trade saw more of those earlier-week gains given back.

For next week the big item on the radar is the ongoing budget clash between Brussels and Rome. Italy is supposed to deliver a revised budget to Brussels on Tuesday, November the 13th. There are no signs yet of either side letting down, as the European Commission digs in their heels with demands of austerity while the Italian government persists with spending programs as part of the platform that helped them to get elected in the first place.

Below, I look into five of the world’s largest equity bourses with eyes on next week.

S&P 500 Softens Before Test of Mid-October Swing-High

Last month produced a brutal show in S&P 500 price action. After the index spent most of Q3 riding along a smooth, consistent up-trend, sellers showed in the first week of October and didn’t start to let up until month-end began to near. Prices put in a rather contentious test of support at a trend-line projection derived from the earlier-year swing lows, and buyers began to grasp control last week. And that recovery largely lasted into this week, until the mid-October swing-high began to near around that Thursday rate decision at the FOMC.

While the balance of power would appear to be continuing to push back to the bullish side, the Dow remains as a more attractive venue for bullish plays on US equities and, as such, the forecast for the S&P 500 will remain at neutral for next week.

Technical Forecast for the S&P 500: Neutral

S&P 500 Daily Price Chart

S&P 500 Daily Price Chart spx500 es

Chart prepared by James Stanley

Dow Jones Runs into Fibonacci Resistance as Bullish Trend Continues

While the S&P 500 remains below that mid-October swing-high, the Dow Jones Industrial Average blew by that level on Wednesday of this week and, as of yet, prices still haven’t reverted back for a test of support at prior resistance. The level that has helped to produce resistance thus far, however, is the 23.6% Fibonacci retracement of the Q3 bullish move in the index. This is the same Fibonacci study from which the 88.6% marker helped to mark the low in late-October.

Last week I had looked at bullish plays in the index on a couple of different occasion using the support zone around the 61.8% marker of this same study, and that helped to propel prices this week up to those fresh near-term-highs. For next week, I want to look for more of the same as this appears to be one of the more attractive equity venues to look for bullish continuation plays. There are two zones in particular that could be attractive for topside strategies, each of which is derived from the same Fibonacci study mentioned earlier. The forecast for the Dow will be set to bullish for next week.

Technical Forecast for the Dow Jones Industrial Average: Bullish

DJIA Eight-Hour Price Chart

DJIA Dow Jones Eight Hour Price Chart

Chart prepared by James Stanley

FTSE 100 Prints a Doji at a Tough Spot

Last week I had left the forecast at neutral for the FTSE 100, and this week will be the same. While August through late-October produced a smooth bearish trend, the false downside breakout in late-October helped to lead to a bit of capitulation of that theme. In the first week of November, as many global bourses were recovering after a brutal month of October, the FTSE did the same, and ran-up to the 76.4/78.6% retracement area as taken from the March-May bullish move. There was even a show of short-term support at this zone that had previously helped to define resistance.

But this week saw that bullish move sputter, and the weekly bar in the index produced a doji, which would appear to put the balance of power back on the bearish side of the matter as the index remains so near those multi-year lows. Nonetheless, more attractive options for bearish plays on equities exist elsewhere in Europe, and with the prospect of higher prices on the back of a Brexit agreement looking a bit more likely, standing aside seems prudent for now. The forecast for the FTSE 100 will remain at neutral for next week.

Technical Forecast for the FTSE 100: Neutral

FTSE 100 Weekly Price Chart

ftse 100 weekly price chart

Chart prepared by James Stanley

DAX Recovery Falls Flat as Resistance Holds the Highs

The venues that I’ve been looking to for a continuation of pain in stocks are mainly in Europe, and this continues to carry the appearance of being the pressure point for global risk. I’ve been following the short-side of the DAX for a couple of months now, as a breakdown below a big zone of support in early-September started to open the door for bigger-picture short-side plays.

That bearish trend ran through most of October, until another area of support began to show from the 50% marker of the 2016-2018 major move in the index, and that helped to build-into last week’s bounce. But, the strength from that bounce began to run dry this week, and sellers appeared to start re-entering the market as prices tested short-term highs. The forecast for next week will remain at bearish for the DAX.

Technical Forecast for the DAX: Bearish

DAX Weekly Price Chart

DAX Weekly Price chart germany dax 30

Chart prepared by James Stanley

Nikkei Pulls Back From Strong Start to November

The Nikkei also had a rough month of October, reversing from a prior bullish breakout that saw the index trade-up to fresh 27-year highs. Along the way came a break below a prior bullish trend-line that had held the lows in the index for the bulk of this year, and that was followed by a breach of both August and July swing-lows. The early-November bounce was encouraging but that fell short of testing the 50% marker of last month’s sell-off, and that gives the appearance that bullish strategies may not yet be ready on the index. If price takes out the key resistance variable around 23,000, that could change; but until then, traders should be very cautious on the Nikkei as the early November recovery could unravel very quickly. The forecast for the Nikkei will remain at bearish for next week.

Technical Forecast for the Nikkei: Bearish

Nikkei Daily Price Chart

nikkei jpn225 daily price chart

Chart prepared by James Stanley

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

Other Weekly Technical Forecast:

Australian Dollar Forecast – AUD/USD Bullish Breakout Attempt Fell Short, AUD/JPY Risks Falling

US Dollar Forecast – Dollar Attempting Another Ill-Fated Charge to Make a Bull Trend Stick





Source link