DAX and SPX Weekly Analyses, Dec 8, 2019

After Monday and strong down day, that was a trend down day on DAX - at the end of the week, down move was negated on US indices. We got a liquidation break, a shallow pullback to first decent support, and nothing more. Yet another confirmation that markets wants higher highs, and now entering a seasonally strong period.

In the week ahead:

Nothing on Monday, and on Tuesday we have Chinese CPI y/y and German ZEW Economic Sentiment. But markets could be calm in expectation of Wednesday and FOMC Statement and FOMC Press Conference. Expectation is that the rate will be unchanged, but there could be more clues at the Press Conference, and the same goes for EU markets, since on Thursday we have Monetary Policy Statement and ECB Press Conference.

Chart #1 - ES_F Daily

After 300 points up move, we are getting just shallow pullbacks, which are getting bought. Buyers reacted on trendline backtest. Obvious bull/bear line is previous ATH. As long as the price above it, bulls are driving this bus.

Chart #2 - SPX CFD 30 min

CFD chart for traders with cheaper tickets - two days of selling, but by the end of the week, all negated. Buy-the-dip setups as combination of trendline test, support levels and fibonacci retracements. Nothing to see there - just business as usual.

Chart #3 - RUT Daily

Russell 2000 tested the breakout point -> break-pullback-continuation. Also supportive for the SPX bull case.

Chart #4 - FDAX and DAX Cash Index Daily

Beautiful trend down day on Monday, first pullback sold on Tuesday, no follow through later, marginal lower low with bullish divergence -> dip bought. Note that this is what DAX usually do - swing lows often come like this, like a spring.

As written TWO WEEKS AGO, on Nov 24th: "we can observe area 12,960-13,020 that would be logical support". Some trades can be planned well in advance, and this was a swing long chance. On right side of the chart above, we can see the range that lasted for a full month, and how buyers picked this shallow 23.6 retrace pullback. Note that previous pullback was 50 - halfback, and ALSO down move was a trend down day, in fact two in a row, Oct 1 and Oct 2. So both times, pullbacks we got was news driven moves, sharp liquidation breaks and trend down days without real follow through. What is that telling you?

  • Buyers are in control as long as they are holding weekly lows, around 12,950.

  • IF DAX loses 12,950 -> THEN 12,800 comes next.

  • Another break above 13,300 and 13,600 prev. ATH could be next.

Chart #5 - DAX Cash Index 60min

Ranges and where we are on smaller time frames

We can find day trading opportunities on both sides, using S/R zones and other references. But it is also important to know "from which side wind blows" in order to not overstay in our trades in case they are counter trend.

Conclusion: On large timeframes, buyers have the upper hand. As long as buyers are holding above weekly lows, higher highs can come. Start of the week UNLESS we don't get a news driven move AGAIN, can be boring and choppy in expectations of FOMC / ECB Press Conferences. Entering a seasonally strong period, and everything will be used to achieve a "Santa Rally". Very negative US-China news OR disappointment from FOMC / ECB - although unlikely to get - can ignite more selling, since pullbacks so far was shallow. Be prepared for both, higher and lower odd scenario.

Stay safe