DAX 40 & DOW JONES: Weekly analysis 2nd – 6th October

<h2>Market movers</h2>
<p>Last week, the stock exchanges posted another week of decline influenced by central bank actions, the strength of the dollar, and rising oil prices. The US 10-year yield came very close to reaching a 16-year high. The resilience of the US economy, combined with rising oil prices, is keeping elevated inflation expectations and fueling further bets that the Fed will keep rates rising for longer.</p>
<p>The coming week will present some macroeconomic data of a certain degree of interest. In China, it will be a national holiday known as Golden Week.</p>
<p>On Monday 2 October, manufacturing figures for Japan, Germany, and the US will be released, offering insights into the health of these economies. Additionally, Governor Jerome Powell will deliver a speech at 5 p.m.</p>
<p>On Tuesday 3 October, the RBA will convene as inflation is back on the rise. Australian monthly inflation has spiked to 5.2%, up from 4.9. in July. This suggests that it’s premature to assume the RBA rate cycle has concluded. However, the RBA may opt to wait and assess the Q3 CPI data, which will be released at the end of October, before deciding on whether to hike interest rates again this year or not.</p>
<p>Meanwhile, the Reserve Bank of New Zealand will hold its policy meeting on Wednesday 4th. Despite the RBNZ’s aggressive stance, market analysts are not expecting another rate hike but are instead attentive to the possibility of officials signaling a possible action in November.</p>
<p>Also on Wednesday, Eurozone retail sales will be released amid growing concern for the health of the shared economy. Sales fell 1%MoM in August as households grappled with inflation that was still over twice the ECB’s target level and amid rising interest rates. There are increasing concerns that the Eurozone contracted in the current quarter and could face a recession in the second half of the year.</p>
<p>In the United States, the ADP data, which is typically seen as a precursor to Non-Farm Payroll will be published.</p>
<p>On the 4th of October, the OPEC meeting will take place in person. Oil prices have rallied over 30% since the beginning of June, approaching $100 per barrel. Saudi Arabia and Russian production cuts, extended until the end of the year, have contributed to these gains. With an expected oil supply deficit in Q4, further supply cuts at this meeting seem unlikely.</p>
<p>Lastly, the August non-farm payrolls exceeded expectations but the unemployment rate unexpectedly ticked higher, and wages saw a slight decline giving the Federal Reserve room to pause interest rate hikes. Both the Fed and the market will be watching for signs that the US labor market is continuing to cool rather than fuelling inflation pressures. Expectations are for job creation to slow to 150k, while average wage growth is predicted to rise by 0.3% MoM and unemployment to slip to 3.7%. A stronger-than-expected non-farm payroll report could bolster hawkish Fed expectations, potentially boosting the US dollar while putting pressure on stocks.</p>
<h2>Weekly analysis and market scenarios for DAX and Dow Jones</h2>
<p>On the 29th of September, the expiry date of the monthly set-up, the stock markets experienced a solid rebound, primarily driven by ‘window dressing’ activities by funds. However, this rebound was not strong enough to indicate the beginning of a new bullish phase. We have therefore managed to witness the expected levels and the bearish movements that we forecasted from the beginning of August to the end of September.</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 most pessimistic 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 still 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>Last week, the S&amp;P500 index posted a further decline, after having tried to break down the resistance at 4274-4263 but without success, closing in the 4329 area.</p>
<p>New supports in the 4324 area, which become weekly. Other supports in area 4307 and 4298-4283.</p>
<p>4274-4263 are confirmed. The loss of this level could lead to a further downward acceleration towards 4249 and then to the 4227-4223 area, the whole zone where volumes managed to concentrate for the upward lunge at the end of June.</p>
<p>Below 4223, there are high chances for further drawdowns 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 zone 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 touched 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 4345 and 4363 areas. Additional supports in the 4384-4393 area. The new weekly resistance is located in the 4400-4405-4411 area.</p>
<p>Above the latter level, strong bullish pressures are still possible with targets to intermediate resistances in the 4430, 4454, and 4470-4503 areas. The 4470-4503 should be recovered to witness the possibility of a return in price increase.</p>
<p>4510-518 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 important 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? The set-up on 29 September resulted in a rebound, thanks to the “window dressing” activity by funds. However, the overall trend remains bearish and we need to assess the possibility of a bottom within 15 days or if we should wait a few months. In the latter case, there is a possibility of further declines up to 10% from the current levels.</p>
<p><img decoding="async" fetchpriority="high" class="alignnone wp-image-26070 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XGER.png" alt="" width="1916" height="840" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XGER.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XGER-300×132.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XGER-1024×449.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XGER-768×337.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XGER-1536×673.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>DE40</strong> – Last week, the German index continued its decline and touched key supports in the 15152-196 area. However, in the last few sessions, prices have made a notable rebound, bringing prices back toward the resistance in the 15500-567 area during the trading day of Friday.</p>
<p>New supports in the 15475-421, 15334, 15253-222 areas (weekly). Confirmed 15152-196. These zones represent the strength of the yearly bullish lunge and must be maintained for the movement to continue.</p>
<p>Supports in areas 14957-14844 and 14737-603 are confirmed. This 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>Resistances in the 15500-567, 15588-687, and 15757-810 areas are confirmed and remain weekly.</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 15967, we could witness a chance for a continuation of a bullish movement on a monthly basis; below 15228, the trend will move strongly downwards again.</p>
<p><img decoding="async" class="alignnone wp-image-26073 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS.png" alt="" width="1916" height="840" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS-300×132.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS-1024×449.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS-768×337.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/XUS-1536×673.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>US30</strong> – Last week, the index experienced a new significant decline, causing prices to break the weekly support levels located at 33931-861 and reaching the monthly support at 33559-434 on Friday.</p>
<p>33559-434 is confirmed as a new weekly support. The break of these zones could lead to bearish solid accelerations.</p>
<p>Other supports are placed in the area 33305, 33216-039, and 32975-858. Underneath, it will be possible to witness new bearish accelerations. Other supports in areas 32804 and 32725 are monthly supports.</p>
<p>Additional supports in the following areas: 32499-632, the loss of which could lead to monthly trend reversals. Following supports: 32801-875, 33945-990.</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>New resistance zones in the 33723-834 area. The break of this latter zone could lead to a swift rebound with targets at 33954 and 34155-188, new weekly resistance.</p>
<p>Other resistances are located in the 34270-364-412 area. The break of this latter zone could lead to a notable rebound, up to the key resistance 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 the first significant breaches of important monthly supports and performed a strong bounce on them. The surge in volatility has led prices to fall forcefully; consequently, the bearish phase can continue until it reaches lower levels, so it is advisable to follow the key levels and not go against the trend.</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>&nbsp;</p>
<p>The post <a rel="nofollow" href="https://www.keytomarkets.com/blog/analysis/dax-40-dow-jones-weekly-analysis-2nd-6th-october-26086/">DAX 40 & DOW JONES: Weekly analysis 2nd – 6th October</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>