Another up week for DAX and SPX. Friday was a down day, with market exhausted and US slapped additional sanctions to Iran. US-Iran relationship can still move markets, in case of escalation. US-China trade relations now comes to the point of getting information about Phase 2. Important economic releases next week will be dominantly from China.
NEXT WEEK: On Monday and Tuesday there will be China data releases, that can influence overnight session for European and US indices. On Thursday - ECB Monetary Policy Meeting Accounts, without Press Conference, and ECB President Lagarde will speak in the evening. Chinese GDP q/y and Industrial Production y/y on Friday.
!!! Earnings season will start for US markets.
Chart #1 - Oil, CL_F Daily
From last Weekly Analyses: "Good run up on Oil, and pushed with the news directly into resistance. ... Something to observe in gauging how serious this possible conflict between US and Iran can be."
As geopolitical risk was cooling off, Oil came down from resistance. Headlines are headlines, but resistance is resistance - meaning to break it without a fight, there must be MORE fear.
Chart #2 - DAX and SPX Cash Index gaps
Big boi gap up on German DAX over previous range, and bunch of unfilled gaps on SPX. Clear RISK ON environment in US markets.
Chart #3 - ES_F 60 minutes
Micro dips bought. New ATH was again made in the Overnight session. Price breached with a false break both lines of a megaphone pattern ( megaphone lines not shown on this chart, but clearly visible on many charts published on Twitter).
Chart #4 - VIX Daily
VIX below downsloping trendline and stuck at lower part of the range.
US markets: Oil down = geopoli risk shrugged. VIX down = volatility lower. Both favours RISK ON conditions, and BTD environment like we see these days. SPX and NDX making new ATHs every other day, RUT still lagging, but trying to catch up.
Chart #5 - DAX Cash Index Daily
DAX with the break above 13,425 left the 2+ months range. IMO - staying ABOVE the 13,425 on Cash, opens door for higher prices. DAX came ~50 points away from ATH. Going back below 13,425 brings price back to the range - yellow rectangle on chart.
IF we make a fib between red X marks on chart, so from ~11,800 to 13,425 -> bottom of the range from the chart comes slightly above 38.2 fib retrace. Buyers frontrunning fib and active on support zone. The only "catch" here is that current swing low came in Asian session, at 2 am CET, so most of European traders missed that.
Since we don't have resistance above ~13,600, then we can make some estimates.
1) IF we use the range of yellow rectangle, THEN 100% range expansion to the upside reaches ~13,950 and to the downside ~12,400.
2) Using the swing with X marks and make a Fib extension of that.
3) Range extreme in day-trading could be the Daily ATR estimated move
DAX: we should have our bull/bear lines or zones for short term trading, and be aware that usually individual days in a week will not be the same, and opportunity potential will be different. NFP Friday offered very limited opportunities. ATH level is very close, so testing it, making false or real break above it, is something that can still happen. Cash Index inflection points are 13,425 and 13,550.
DAX and SPX: For both markets, we are now in a period when Earnings releases for Q4 of 2019 starts. US markets will start first, and traditional start is with Alcoa reporting on Jan 15, 2020. Before Alcoa, usually several big banks will report - this is next week. For example, Citigroup on Jan 14th.
For German market, out of the 30 DAX components, usually SAP will be the first one, reporting on Jan 28, 2020.
US markets are pretty stretched, and there we should look not only to indices, but also to leading stocks, primarily Apple and Microsoft.
Chart 6 - MSFT Daily
Check this on Monthly chart... parabolic advance. But when we look at it on Daily chart, we can clearly see that every single dip was bought.
Buyers are still the dominant force on both markets. In daytrading, we can find short opportunities, and sometimes that will be the trade of the day, but serious selling can occur only after important supports are broken, and big funds start to liquidate.
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.