DAX and SPX Weekly Analyses, Dec 15, 2019

Yet another up week for DAX and SPX is behind us. FOMC and ECB events were non-events, but not bearish either. Several US-China news driven moves, and UK elections, all bullish for the markets. Phase 1 deal need to be signed in January. This lacks clarity, since one story is from US side, maybe "slightly" different from the China side, but generally speaking, this is bullish for the markets. We are also entering into a seasonally bullish part of the year, which is second half of December. However, there should be ocasional liquidation breaks, which are going to be just another buying opportunity, unless markets break and hold below bull/bear levels.


In the week ahead:

Monday - China Industrial Production y/y and French, German, EU, UK and US Flash Manufacturing PMI and Flash Services PMI. On Wednesday we have ECB President Lagarde speaking and German Ifo Business Climate. Nothing much on other days, and markets as usual concentrated on US-China trade deal information.


Chart #1 - ES_F Weekly


SPX and NDX printing new ATHs, small cap RUT again a bit weaker, but nothing concerning so far. After a break and backtest of rising trendline at ES_F chart above, we could tell that the first significant support is around 3070-75, and then we have bull/bear line at former ATH, around 3030. DAX had a test of DMA50, but SPX is stronger index, and well above it.


Chart #2 - SPX Cash Index Daily


After breakout above 4-day balance on Thursday, market made another ATH on Friday - but in overnight session. All prior ATHs made in overnight sessions was later revisited and higher highs was made in RTH session. There are three unfilled gaps on the way down to 3070 support.


Chart #3 - DAX Cash Index Daily / Weekly


DAX was in the range, but then that rectangle morphed into a megaphone pattern, or Broadening Formation - clearly visible on both Daily and Weekly charts. There is a good article on Investopedia about this pattern, on the following link.


Chart #4 - DAX CFD 240 min zoom


Zooming on this megaphone and important levels for next week. On Friday we had a massive premarket move, and new yearly high at 13,460. Previous yearly high is 13,380. Market reaction to this two levels will be important, as well as 13,260 - Friday low. ATH level is very close now.


Conclusion: Nothing is bearish on both SPX and DAX. For daytrading, we can get two sided activity and opportunities on both sides, but buyers are still dominant, as long as they keep the price above better support levels. Again, that levels for SPX are 3070-75 and 3030, and for German DAX short term levels are 13,260 and 13,180. More important ones for DAX would be holding above DMA50 - since price can retest that moving average again.

 

In short term trading it is very important to properly understand context heading into every day, to know from which side wind is blowing - who has the short term control, and which side will be forced to liquidate IF and WHEN market hold above or below a certain level. What is the level of volatility, what can we expect from any particular day, what market already done in premarket session, what possible setups can be available, and so on... the things that we constantly learn in the DAILY DOSE OF DAX.


Cheers, StrayDog