Another down week for both DAX and SPX, and the hard bounce from support levels above DMA200. That would be the summary of the previous week, in which we have seen triple top on daily chart of DAX, failure from 12,500 and two trend down days. Also two weak US PMIs, coming after worse German Manufacturing PMI in many years (released on Sep 23rd). Bearish ascending triangle and bearish rectangles as down continuation patterns. Bull flag failure and moving down on SPX was very similar like in Oct 2018 - will the remaining move be also similar, or business as usual, meaning just shrugging all bad data and BTFD? Bulls say up, bears say down, traders must be prepared for both.
Week ahead of us:
We can't escape from FED Chair Powell, even if we want, since he will talk on Monday, Tuesday and Wednesday. There will be FOMC Meeting Minutes on Wednesday and ECB Monetary Policy Meeting Accounts on Thursday. So, we are heading into the week of Central bankers, with not so much of real economic data. Still some time until new Earnings cycle.
Chart #1 - SPX and DAX Cash Index Daily
SPX: Down move filled some gaps, and we have new unfilled gap now after the bounce, at 2910.63. Something to carry on, since market tends to "repair" those holes.
DAX: "Repairing" of weak structure was evident on DAX, and Middle term bearish scenario from last Weekly Analyses happened. Now we have triple top on 12,500 and almost all gaps that was made in up move filled, except 11,839. Market was below this reference, BUT on Thursday, Oct 3, during holiday, when Stock market was closed, so gap was not filled. New unfilled gap is on 12,264.
Chart #2 - SPX CFD 240 min
Clear bounce from support, and after being short-term oversold. Also, DMA200 near-by. Possible pullback again toward former Inflection point (2942 on index, 2947 futures), and markets reaction there, could give us some hints of future moves. Going under it again could lead to filling that gap from previous chart. If level holds, we could get another attempt to go higher toward ATH.
Chart #3 - DAX CFD 240 min
DAX also bounced from support and DMA200 near-by, and made a spring below LTF level of 11,860. However, that was on holiday, and that Thursday low can have less significance than Friday low - let's observe next chart.
Chart #4 - DAX CFD Daily
Thursday low around 11,820 and DMA200. Low on Aug 6 was made outside of RTH session. Usually prominent swing lows (or highs) are made in RTH (Regular Trading Hours) session. That Aug 6 low was revisited later, and at the end, lower low was made. IMO, here we have a similar case, and this low, from Oct 3rd is prone to be revisited at some point in time.
Friday low around 11,880 is a low made in RTH session. When you make a Fibonacci retrace of entire up swing from 11,265 low to 12,500 high (not shown on chart) - you will find out that Friday low is halfback of that entire move. Both of those lows, 11,820 and 11,880 with DMA200 are important references for next week, as well as first resistance at 12,150 and triple top at 12,500. Those are our inflection points now.
Bearish case require strong daily close below DMA200, and bullish case break above 12,500. While we are in-between, we could use 12,150 as short term bull/bear line.
In any case, we will keep an eye on SPX, and be open to any scenario.
In day-trading, it is of utmost importance to be prepared, to know your levels and S/R zones on lower time-frames, and where you could have a high odd setup for asymmetric risk-reward. Sometimes those setups will be against market direction, sometimes in line with it. After a slow day, we can get a strong day, or even a trend day, and then trader must recognize that change in the narrative, and instead of fading zones, become aggressive breakout trader. Or at least, know when to stay out of the way. Previous week was good to learn all sort of setups, and to observe market behaviour during trend down days.
I wish you all a very pleasant weekend and good trading.
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