StrayDog's Weekly Analyses - July 26, 2020

Breakout attempts on SPX and DAX failed, with gaps above partially filled. NDX dropped after making a double top. All indices with weekly rejection tails. That would be the short Recap of last week. Other than that - slower PA with fading better S/R zones and false breaks as main day trading setups.


Week ahead of us is full with news and earnings reports. I have selected only the important ones in this table.


FOMC Statement with Press Conference on Wednesday, and FAANG reporting, and 10 out of 30 DAX component companies with Earnings reports.

SAP and Linde are the biggest ones in DAX30 Index Weighting.



Chart #1 - The "warm up" chart



To observe the weekly candles - the tails there and to compare this four instruments. Also a visible RSI bearish divergence on Weekly tops on NQ.


SPX and DAX have bearish divergence also, but between daily tops (June 8th and July 21st), as was noted 9 days ago:




Chart #2 - NQ_F Daily (with DMA50)


Double top, channel support is one thing to watch. Break of channel could lead to DMA50 and round number 10k.

Circles on horizontal supports of 10,300; then prev. ATH level, then confluence of S level and 38.2 fib retrace.


Take a look on Daily charts of Apple, Amazon, Google and Facebook - which will have Earnings next week. Channel broken on Apple, DMA50 on all of them.



Chart #2 - SPX Daily


Observe the last week, and a range between 3200 and 3280, on the zoomed part of the chart. Those levels are the most important ones now. Trendline support also.

SPX partially filled gap and rolled down. Losing 3215/3200 can lead to 3115 and DMA50.

Move above 3280 to filling the gap and moving to ATH.



Chart #3 - DAX Cash Index Daily


Gap down on Friday left another hole on the chart. Channel is broken.

Same like on SPX, German DAX managed to only partially fill the gap above, the one that goes to 13,500. "Look above and fail" on both.



Chart #4 - FDAX Daily



Another look on DAX, this time on futures. Break below 12,770 leads to filling the gap on 12,697 from the cash index and toward 12,400.



Conclusion:

Sellers took control last week. Price action was more boring than decisive, and our main sell setups were fading good resistance and false breaks, with longs from good locations only. Neutral-bearish. For bigger downside moves, we need to see more weakness, and better downside momentum.


From last Weekly Analyses:

"... drop below next Support (3115 on SPX and around 12,400 on DAX) can lead into heavier selling and correction..."

Buyers expected active on those supports.


Chance for more downside is NOW, the question is will sellers succeed of fail. As always - watch tempo and momentum, and how markets reacts on inflection points. Now is the time to learn to trade false breaks, since this was the third week in a row, full of those setups. Real breakouts / breakdowns require stronger momentum and follow through.



Simple setups


Draw. Draw horizontal lines, draw trendlines. Many simple but powerful setups lies there.


Example #1 on NDX:


Check where is the price now.



Example #2 on NDX, from Friday, July 24th. RTH entries:


Long: First test of trendline long, also spring below gap. Later, 61,8 fib retrace of the RTH move.

Short: Channel test in ON session - not marked; fading the resistance zone



>> That would be it for this Weekly Blog.



 

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.

Cheers, StrayDog