DAX 40 & DOW JONES: weekly analysis 16th – 20th October

<h2>Market movers</h2>
<p>Last week, stock exchanges experienced a sharp decline despite a promising recovery. FED officials have signaled a possible shift towards an accommodative phase; however, the possibility of further drawdowns remains high.</p>
<p>The economic calendar will bring some particularly relevant data.</p>
<p>On Tuesday 17 October, we will be looking out for the ZEW index in Germany and retail sales in the USA. The data related to US industrial production, as well as the inflation data from Canada, will also be noteworthy of interest.</p>
<p>On Wednesday, October 18th will be released the GDP for China which will be fundamental to assess the health of the Chinese economy. Growth is expected to rise 1% QoQ after increasing 0.8% in Q2. The data comes amid mixed expectations for the Chinese economy, with the IMF downwardly revising GDP forecast for 2023. However, U.S. banks have started to raise China’s GDP forecast, with economists expecting growth of 5% for 2023, suggesting that the economic slowdown since April could be turning a corner.</p>
<p>Also on Wednesday, inflation data will be released from both the UK and the European Union. These figures are very important for assessing whether inflation has stabilized, potentially averting further interest rate hikes. In the US we will receive data on building permits and housing starts.</p>
<p>Moving on Thursday 19th, we will monitor the release of several key data in the United States, including jobless claims, the Philadelphia Fed manufacturing index, and existing home sales. Late afternoon, We will also hear from FED governor Powell, along with other speeches held by officials from both the FED and the ECB throughout the week.</p>
<p>Last week the earnings season began. Forecasts are less negative than previous ones. Nine market sectors are set to report year-on-year growth in revenue, with consumer discretionary leading the group, while energy and materials are expected to post a revenue decline.</p>
<p>The focus for this week is on the quarterly earnings of Netflix, Tesla, and Procter &amp; Gamble.</p>
<h2>Weekly analysis and market scenarios for DAX and Dow Jones</h2>
<p>The international stock exchange concluded the trading week with mixed signals and a sense of indecision. As anticipated in early October, the markets displayed a significant rebound. However, the weekly closure levels experienced considerable downward pressure which could lead prices to new lows. In the meantime, it is fair to state that if the lows from the beginning of the month are held, then markets may indeed have bottomed as initially expected.</p>
<p>As a rule of thumb in these cases, typically, after posting a lower low in October, the decline tends to cease. Therefore, the markets could rebound with the formation of some bullish swings on a weekly time frame or a new high could be reached, expected to be formed between October and November. In the worst scenario, the markets will post an upward movement from November, in line with the annual set-up. We’ll closely monitor how events unfold.</p>
<p>The scenario that sees the annual highs between the end of November and the beginning of December remains intact.</p>
<p>From the lows of the week of March 13, the rise of the international stock markets has been incredible. The thesis that supported a lead to a very strong climb until August 4th, the annual setup, was confirmed with almost millimeter precision. Everything occurred as we predicted, and between September 2022 and March 2023, all international markets posted their temporary lows (which could also be the ten-year lows).</p>
<p>The next crucial days will be toward the end of the month, and we should monitor if we can reach this month’s low during the current week.</p>
<p>Beyond the rhetoric of the debt ceiling, the recession, and the banking crisis, only a decisive flip in sentiment could lead to a trend reversal. Earnings of US mega caps have shown off and many other companies are also ramping up the increase in revenue.</p>
<p>The average annual returns on international equities (World Stock Exchanges based on GDP) are around 11%. Current rates in America are more than 5%. With a projection for 10, 15, and 20 years, equity markets always beat bond markets. Therefore, we should be at the starting point of a 10-year bull market.</p>
<p>Rising interest rates won’t directly and inevitably lead to a recession. As long as these hikes are balanced with economic growth, there should be no danger. On the other hand, an exaggerated rate cut could drag down the markets for a long time.</p>
<p>The likely lows in October 2022 will have a high probability of remaining so for many years. They could represent the lows of the entire decade. Despite some short-term overbought, the markets are unstoppable and will be so for a long time. Here is why.</p>
<p>We have highlighted several times that stock prices tend to move at least 6/9 months before the economic cycle. For this reason, during the final part of 2022, the markets would have posted a significant bottom between June and October and then taken off again for the long term. The prices marked during the year had discounted the most unfavourable geopolitical and geo-economic conditions.</p>
<p>During 2023 we expect the following pattern to emerge: the low should be posted in January or during Q1 2023, and the high during Q4. Average market returns up to 20-25%.</p>
<p>As always, we will confirm the annual forecast from time to time.</p>
<p>The S&amp;P500 index closed the week posting a further decline, after trying to break down the weekly resistance located in the 4400-4405-4411 area, slightly touching 4430 but without success. On Friday prices managed to close in the 4351 area.</p>
<p>New supports in the 4334-4320 and 4309 areas. The loss of these areas could lead to further declines. Other supports in areas 4296-4293 and 4287-4282. New weekly support in the 4271-4263-4257 area.</p>
<p>The 4227-4223 have been confirmed and in these areas, trading volumes managed to concentrate as a result of the rise that began at the end of June.</p>
<p>Below 4223, there are high chances for further drawdown acceleration targeting the supports at 4204 and 4196-4190. 4177-4170 is still a critical mark.</p>
<p>Confirmed the supports in 4153, 4144-4140, 4124-4117, and 4100 areas. The loss of the latter support could lead to heavy drawdowns</p>
<p>Confirmed the supports in 3930-3905-3899, 3945-3957-3961, 3979, 3993-4000, and 4032-4043 areas. The 4064-4075 areas remain a crucial support.</p>
<p>3890-3879 is still a critical area because, in this specific area, buyers managed to concentrate. Additional support in 3864-3857 areas. Another intermediate zone is located in the 3822-3814 area.</p>
<p>Support in the 3808-3798 zone was confirmed, below which prices could start a new downward spiral.</p>
<p>Confirmed supports in 3669, 3680-3689-3701, 3711-3726-3733 areas.</p>
<p>3762 and 3711 are the monthly levels that support the current uptrend, so beware of any breakout of these levels: We could witness a new trend inversion.</p>
<p>The psychological support of 3600 remains crucial. The support at 3644-3651 has halted the fall and is now the monthly support after this solid uptrend. It shouldn’t be reached again, to avoid new and heavy downward movements. Below is the 3607 level. Then again, the 3557-3547, 3538-3524, and 3514-3507 are support levels. The 3485 support is now the annual, critical, and historical level for the S&amp;P500 index. We will monitor whether this last level could stop, at least in the medium term, the bearish direction of the markets. Should we go beyond it, 3200-3300 will be the target, sought after by funds, investors, and traders halfway around the world.</p>
<p>New resistances in the 4368 and 4383-4400 area. New weekly resistance in the 4411-4416 area.</p>
<p>Above the latter level, the potential of strong bullish pressures remains, with intermediate resistance targets in the 4430, 4454, and 4470-4503. The entire area should be regained to open the getaway for a potential price uptick.</p>
<p>4510-518 is confirmed. Intermediate resistance in the 4525-4538 area and key resistance in the 4557-4564 area.</p>
<p>Confirmed 4575-4580 and the resistance offering a new bullish lunge in the 4595-4607 area. Resistances 4617-4622 and 4629-4632 are confirmed.</p>
<p>The upside targets are still 4662 and 4680, beyond which critical resistance levels must be overcome before reaching new all-time highs.</p>
<p>The weekly closure above 4613 guarantees the annual trend reversal if confirmed on a monthly basis; the following targets remain 4717 and 4780.</p>
<p>How to move? Typically, the drawdown posted in early August will end in September or in the first ten days of October. In the first week of this month, a bullish swing was formed but on Friday it appeared to be challenged. The current week will provide insights on whether the formation of the monthly low, from which to potentially start a rebound. As always, we have to monitor the openings on Monday and the closings on Friday which will give us the best ideas.</p>
<p><img decoding="async" fetchpriority="high" class="alignnone wp-image-26314 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xger30.png" alt="" width="1916" height="840" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xger30.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xger30-300×132.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xger30-1024×449.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xger30-768×337.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xger30-1536×673.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>DE40</strong> – Last week, the German index posted a heavy drawdown, after touching the resistance at 15500-567 and closing in the 15119 area.</p>
<p>New supports in the 15107-082 area, the loss of which could lead to a heavy downturn.</p>
<p>Supports in areas 14957-14844 (weekly) and 14737-603 are confirmed. This latter area becomes the yearly level for new upward movements or heavy drawdowns.</p>
<p>Confirmed intermediate supports 14138-184, 14342, 14414-545.</p>
<p>Critical area in the 13814-781 zone. The loss of the volumetric zone 14069-13974 opens the gateway to the monthly support in the 13621 area.</p>
<p>Solid supports in areas 13692-608, 13550-516, and 13457-410. Supports 13314-333, 13331-410, 13438-467 confirmed.</p>
<p>Confirmed volumetric supports in areas 12865, 12833-12909, 12978-13038, 13113-178, 13222-280, 13307-357.</p>
<p>Confirmed the supports in area 12808-766. From 12628 to 12766, there are a series of intermediate supports, helpful for long entry from pullbacks. 12566 becomes monthly support.</p>
<p>Other key supports are 12407-517, for the concentration of volumes, and 12353-275, the first bullish turning zone. Confirmed support in areas 12223 and 12136.</p>
<p>It was also confirmed support in the 19920-15006 area. This is 11875-11950-12024, which halted the price fall after the US CPI data on October 13th. Losing it would mean new bearish pressures and a touch of the weekly support in the 11766 area; with extensions to 11650 and 11542 below it. The 11095 mark could be a target in case of a massive sell-off. These levels can be considered annual reversal points.</p>
<p>New resistances in the 15143-169, 15251-316, 15343-386, 15423-457 areas, and 15484-547, which become the new weekly resistance.</p>
<p>Resistances in the 15588-687 and 15757-810 areas were confirmed.</p>
<p>15923, 15959-992 and 16024 confirmed. Above the latter, possible new price accelerations.</p>
<p>16054-104 confirmed. Breaking these levels could lead to a fast rebound up to key resistance at 16225-253, where Tuesday’s 2 August gap will be filled. Additional resistances in the 16272-335 area, the breaking of which could lead to the annual highs in the 16517-475 area.</p>
<p>If by the following Friday, prices remain above 15413, we could witness a chance for a continuation of a bullish movement on a monthly basis; below 15165, the trend will move strongly downwards again.</p>
<p><img decoding="async" class="alignnone wp-image-26320 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS30-1.png" alt="" width="1916" height="840" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS30-1.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS30-1-300×132.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS30-1-1024×449.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS30-1-768×337.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS30-1-1536×673.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p>&nbsp;</p>
<p><strong>US30 &#8211; </strong>Last week, the US index failed to break the resistance at 33723-834, and breaking through the latter level could have triggered a new strong rebound. Prices closed slightly lower on Friday, around the 33614 area.</p>
<p>New supports in areas 33431-364 and 33113-028. The new weekly support is located in the 32976-878 area.</p>
<p>Below it, new bearish accelerations are still possible.</p>
<p>Additional supports in the 32804 and 32725 area, monthly supports.</p>
<p>Other supports in the following areas: 32499-632, the loss of which could lead to a trend reversals on a monthly basis. Next supports: 32801-875, 32945-990.</p>
<p>Confirmed supports are placed in two well-bought areas: 31197-497 and 31536-764. Other support areas are placed at 31753-920, 32111. The 31861 level still remains a key one.</p>
<p>31036-31125 is still to be considered critical support for the monthly level. Confirmed 30953-815, 30715-614, 30559-381, 30253-136, and 29696-29906.</p>
<p>The 29485 mark remains a critical one. In addition to the 29619-529 and 29338-29264, the support zones 29159-28876 and 28800-28685 are again kept. These are all excellent supports to look for long entry opportunities from pullbacks. Should they all be pierced to the downside, prices could move toward 28319, 28051, 27765, and 27019 in extension</p>
<p>The new resistance area in the 33587-687 should be recovered swiftly to have new chances of some bullish pressure. Other resistances in the 33746-806 and 33861-918 area.</p>
<p>33954 and 34155-188 confirmed, which remain the weekly resistance.</p>
<p>Other resistances in the 34270-364-412 area. The breakdown of this latter zone could lead to a strong rebound, up to the key resistance levels located in the 34617-779 area.</p>
<p>Confirmed 34801-833, 34868-913, 34985 and 35020-050.</p>
<p>35109 is confirmed, and a breakout above it could trigger a strong rebound. Additional resistances are at 35166 and in the 35273-378-444 area.</p>
<p>35539-591 confirmed. At 35620, the gap of August 2nd will be filled. Final resistance in area 35673-715.</p>
<p>The break of this monthly resistance zone opens the gateway to the 36068 weekly target.</p>
<p>Monthly positioning of the price above 35599-963 could offer a new bullish direction on a yearly basis. A movement that will go through 36529, managing to keep this level, would offer the possibility of reaching the 37000 area if prices forcefully break the last resistance placed in the 36786 area. Above 36236, we keep the possibility of further volumetric upward thrusts.</p>
<p><strong>IMPORTANT NOTE:</strong> The market has posted its first breakout attempt, looking for a real rebound, and in line with the expected October seasonality. However, further confirmation is required, and this might extend up to the annual set-up on October 30th and then to the FED meeting on November 1st. Therefore it is advisable to limit intraday operations until key support and resistance levels have been decisively breached on a weekly basis.</p>
<p>Also, this week, it is wise to note Monday’s openings and Friday’s closings for confirmation or denial of the current trend. Avoid overtrading and watch for volatility imparted by HFTs. Mark any gaps that may also appear during the week, with particular attention to those on Monday.</p>
<p>Happy trading!</p>
<p>The post <a rel="nofollow" href="https://www.keytomarkets.com/blog/analysis/dax-40-dow-jones-weekly-analysis-16th-20th-october-26336/">DAX 40 &#038; DOW JONES: weekly analysis 16th &#8211; 20th October</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>