Past week on DAX was marked by news driven spike on Thursday, and for now, we have a false break above 12660 LTF level. SPX is still in the range.
Next week: More Brexit drama, ECB, and Earnings reports. More impact on DAX, than on SPX, since US markets will wait for FOMC Statement on Oct. 30, and are much more interested in getting another rate cut from FED. Brexit deals and negotiation will mark next week as well. Although UK Prime Minister previously said he would rather be “dead in a ditch” than ask for any extension to the Oct. 31 deadline - after the Saturday vote, he still asked for it.
Important scheduled economic data are going to be on Thursday, starting with German Flash Manufacturing PMI. We can remember last release, that was on Sep 23rd, very bad one and two down days after it. On the same day there will be Main Refinancing Rate, Monetary Policy Statement and ECB Press Conference. We are going to say goodbye to Mario Draghi, since his term ends on Oct. 31. German GfK Consumer Climate and German Ifo Business Climate are scheduled for Friday.
Out of big numbers of large companies reporting Q3 earnings next week, no doubt that markets will pay most attention to Microsoft on Wednesday, and Amazon on Thursday. In Germany, SAP will report on Monday, and as biggest DAX component, that can be a market mover. Next in line will be BASF and Daimler, both on Thursday.
Chart #1 - DAX Daily CFD vs Cash
Upthrust over 12,660 level is clearly visible on the weekly charts as well, only the low of the recent up swing is different on CFD or Futures chart versus Cash chart, due to trading on holiday- Day of German unity on Oct 3rd. Futures and CFD charts had low on that day, while Cash chart has a low on Oct 4th. In any case - next LTF level is 12,500 and we can see other levels as well, going a bit lower, on 240 min chart.
Chart #2 - DAX CFD 240 min chart
Buyers need to hold above 12,660 and then 12,700 to try to make a push higher, but that upthrust we had on Thursday is at least short term bearish, and sellers now need to hold the price below 12,660 and to make a breakdown attempt of first support level of 12,600. This level was tested three times on Friday. If it gives, next one in line is 12,500 and 12,460 - lower one is in line with fib retracements from Chart #1, as well as with unfilled gap on the next chart.
Chart #3 - DAX and SPX unfilled gaps
First unfilled gap on DAX to the downside is 12,487. First to the upside is on 13,010. Good part of the DAX 1000 points advance is due to Brexit talks, and that can be completely negated. IF we get a down move, use levels and unfilled gaps as targets. In case of the up move, first resistance is Thursday high - around 12,820 then 12,890. Pretty much nothing is there between 12,890 and 13,200.
SPX on large time frames is not doing much for months, and is trapped in the range, providing opportunities only for short-term trading.
Chart #4 - SPX Daily chart with DMA 200 and prior FOMC Statements marked
Next FOMC Statement is scheduled for Oct 30, but next ECB Statement will be on Thursday.
Chart #5 - DAX Futures Daily chart and ECB Statements of 2019 so far
We had six ECB Statements this year, and as always, it is very hard to project the possible outcome, and what happened each previous time, you can see on this chart. Market is usually choppy into the release, and want to wait for it near better S/R level. Trading the market reaction AFTER the release is usually the best thing to do.
Conclusion: Brexit and ECB Statement will likely have much bigger impact on DAX, then on SPX. SPX has known inflection points: trend-lines from Chart #4 and ATH level. US markets will pay more attention to their politics, earnings - especially MSFT and AMZN, US-China trade deal, and waiting for the FOMC Statement. Markets in general, don't like uncertainty, and that is exactly what they got now, especially in Europe. Uncertainty leads to more volatility, and that means more opportunity, bigger daily ranges and continuation type trades. It also means that traders must adjust to that. Bigger daily range means not only possibility of large winners, it also means using bigger stops, and possible false breaks of various references, that can get you stopped, even if you are right about direction. More opportunities means also that we can cover loses in day-trading that same day. And instead of having 2-3 opportunities, maybe to get 5-6. But, volatility adjustment to trading must be made. Market will likely react from large time frame inflection points, even if broken later. In case of strong and sustained momentum, going with the move is better than to fade it. Be prepared to constant daily adjustments, and don't get married to a position.
Cheers, StrayDog
(this is done on lap-top, so possible lower resolution of images)