From last Weekly Analyses: "Higher odd scenario is - more downside to come, IF markets can't hold current support levels, and that is DMA50 area on SPX, and current lows on DAX. "
That bounce from DMA50 on SPX was really something. On strong markets, downside needs support breakdowns, while upside needs just a lack of weakness. All markets are not the same, like we are going to see on charts below.
But first, what data releases and earnings reports do we have next week?
Nothing much, market mover companies in US already reported earnings, in Germany so far just 5 out of 30 DAX Index components. German Preliminary GDP on Friday could be interesting.
Chart #1 - SPX Daily
Bounce from DMA50 and three additional cash index gaps made last week. New ATH also.
Chart #2 - ES_F 240 min
Zooming on futures, support levels again inside chart.
Chart #3 - NQ_F Daily
No doubt that NDX is a leading index of US markets. Nowhere near DMA50, making new ATHs.
Chart #4 - RUT Daily
Small cap index Russell 2000 with a solid down day on Friday (-1.23%) and with the lower high.
What can be said about US indices? Nothing much new, except to repeat: On strong markets, downside needs support breakdowns, while upside needs just a lack of weakness. In the meantime, there will be lots of Coronavirus headlines, "Recession around the corner" headlines, and similar. There will be some "headline risk", but in trading using technical analysis, we stick to the charts and IF -> THEN scenarios. So, on SPX - low that was made on Friday, Jan 31st - THAT is the most important support for now. There is no bear case, IF that can't be broken. Homework for you, dear reader: check the SPX / NDX on Weekly charts as well.
Moving on to Europe, where markets are also not the same.
Chart #5 - Combo Monthly chart of Euro Stoxx 50 and eight European indices
Euro Stoxx 50 is nowhere near 2007 high, not to mention high from 2000. CAC 40 very similar. Indices from Sweden and Denmark leading, making new ATHs. All others - trying to make a breakout. These are rough charts, and serve just as an example of different countries and their respective indices.
Chart #6 - DAX Weekly
No doubt of an uptrend on this chart. There are room on the upside, and on the downside as well. Stay open for anything, since market is in the tricky pattern.
Chart #7 - zoom on the previous chart
Note the previous two weekly candles. Last week negated the previous one.
Chart #8 - DAX Daily, patterns
As said above - tricky pattern, and you can't know in advance how many times will the price test the pattern boundaries before the decisive move. Two years ago, that move was to the downside. Inside this pattern on DAX, there are currently only three unfilled cash index gaps - 13,575, 13,045 and 12,982.
Now we can again observe ALL of the above charts... US and European indices. They are all trying to move higher. Where is this going? Is there a free lunch here?
And the answer is - there is NO free lunch this time. Sometimes it is easy to predict short term movements. With great odds. Most of the time it is not that easy. Intermediate important support on DAX is around 13,360. Going below it, and price could again test the lower edge of the pattern. Staying above it - it could fill that 575 gap and break above. We got a false break above the previous ATH, and move down at first was logical. But now, price is again there. Making higher lows. Homework - check the OXJ (ASX 200 - Australian index) chart for false break above prev. ATH, break later, and test of the break.
For now, IMO - nothing to swing trade here. Opportunities were to sell the false breakout, and for buying that Jan 31st low - that was made at 21:30 on Friday and end of the month... well, sometimes we get that kind of shitty timing.
Day by day, and for daytrading - when we don't have the clear picture - zone-2-zone.
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.