DAX 40 & DOW JONES: weekly analysis 31st July – 4th August

<h2>Market movers</h2>
<p>The stock exchanges still manage to close higher, with some indices like the Nasdaq remaining under pressure despite excellent quarterly earnings from players such as Coca-Cola, Alphabet, and Meta. However, this positive momentum is offset by some big caps in the financial, insurance, and airline sectors which have not met analysts’ expectations. Central banks take historic steps forward with the FED bringing rates to levels not seen for 22 years. The ECB has raised rates for the ninth consecutive time, while the Bank of Japan is preparing to make some moves from its ultra-expansive monetary policy in an attempt to correct rising inflation.</p>
<p>In Europe from a macro data point of view, we will have the July flash inflation for the whole Eurozone, the PMI indices on the manufacturing, and the PMI in the service sector. In the United States, we will monitor the non-farm payrolls and the report on the labor market.</p>
<p>The spotlight will also be on the central bank meetings in Australia and the UK.</p>
<p>The UK Central Bank should raise interest rates again; however, after slowing inflation data, the market is more inclined towards a 25bps increase instead of a 50bps hike.</p>
<p>On Tuesday the RBA should opt for a pause in hikes as inflation fell more than expected in the previous quarter.</p>
<p>On Friday, August 4th, will be released the US non-farm payroll. In June, employment data fell to 209k, although this was a very solid figure, it was lower than the 225k expected and the slowest pace of growth since December 2020. A greater slowdown in job creation could fuel recession fears.</p>
<p>Moving to the corporation side, the US quarterly earnings season continues.</p>
<p>On Tuesday we’ll evaluate the numbers of Pfizer, AMD, Starbucks, and UBER. Wednesday will be the day for Qualcomm and Paypal. And Thursday the two giants of the tech sector: Apple and Amazon.</p>
<p>On Thursday the 3rd of August, Apple will report Q3 earnings after the market session. While Apple’s numbers so far this year have been uninspiring, the share price has still managed to reach a peak and the market cap hit $3 trillion.</p>
<p>Amazon is expected to post higher profits and year-over-year sales when it will report Q2 earnings after the markets close on Thursday, August 3rd.</p>
<h2>Analysis of the week and scenarios for DAX and Dow Jones</h2>
<p>For three weeks in a row, the Dow Jones managed to close in positive territories: 13 green consecutive sessions which is the best result since 1987. In this way, the American stock markets confirm their bullishness but this shouldn’t let our guard down. The week that has just ended has seen a loss of momentum from the bulls who now have to monitor the weekly supports very carefully.</p>
<p>Rallies usually end with a double top and then a gap down which will trigger a clear directional movement. So, from now on we will be monitoring carefully any new peaks and divergences.</p>
<p>For now, the thesis that forecasts a significant peak in the first fifteen days of August is still valid. In fact, everything has happened as per our forecast, and between September 2022 and March 2023, all international markets have reached their lower levels (which could also be the ten-year lows). It looks like we are close to these levels but the stock indexes seem to grind full steam ahead. If there won’t be any clear bearish signals, the mid-August setup could bring new positivity.</p>
<p>Beyond the rhetoric of the debt ceiling, the recession, and the banking crisis, only a strong 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 managed to post a slight decline, after reaching a new annual high in the 4634 area and closing on Friday in the 4607 area.</p>
<p>New supports in the 4600-590 area, the loss of which could lead to an acceleration of downward prices if the 4584 area is lost on a daily basis.</p>
<p>Last week’s support in area 4548, 4538-4529 and 4511-4499 are confirmed. From this latter level, if forcefully lost, a major correction could begin. Next supports in the 4463-4453-4436 area, which is also the weekly support area. 4429-4420 confirmed. 4418 and 4403 are well confirmed. Other supports in area 4394 and key support in area 4386-4370.</p>
<p>4368-4355 are again confirmed. Below it, downward accelerations are possible, with the first target in the 4304 mark. Confirmed the 4274-4263, and if these levels are to be trespassed, it will bring a downward acceleration toward 4249 then 4227-4223, the whole zone where volumes managed to concentrate in recent weeks.</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 supports in areas 3930-3905-3899, 3945-3957-3961, 3979, 3993-4000, 4032-4043. 4064-4075 is still a critical mark for support levels.</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. 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 4607, 4617-4622, and 4629-4632 areas. The weekly targets are 4632, 4662, and 4680, from where important resistances are located before being able to see new historical highs.</p>
<p>A weekly closure above 4613 may guarantee a reversal of the annual trend if confirmed monthly; the next targets remain 4717 and 4780.</p>
<p>How to move? We are experiencing the annual setup week and what will happen on Thursday or Friday will suggest to us if there will be a chance to witness the beginning of a correction on the stock exchanges.</p>
<p><img decoding="async" loading="lazy" class="alignnone size-full wp-image-24679" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/dax.png" alt="" width="1916" height="840" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/dax.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/dax-300×132.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/dax-1024×449.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/dax-768×337.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/dax-1536×673.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>DE40</strong> – Last week, the German index reached a new historical level by a scratch of points, touching the 16492 area after breaking the weekly resistance at 16230-280.</p>
<p>The loss of new supports in the 16402-348 area could lead to sudden downward accelerations with targets for the intermediate supports located at 16264 and 16184-131. Key supports 16115-051 and 16023-009 which become weekly.</p>
<p>Confirmed 15973-900, 15814-749, 15631 and weekly support 15596-439. Supports in 15439, 15368-308, 15287-247 areas are confirmed and followed by 15152-196, 15247-287 and 15308-368. These zones represent the strength of the ongoing rally and must be held for it to continue the movement.</p>
<p>Supports in 14957-14844 and 14737-603 are confirmed. This area becomes the weekly level for new upward movements or heavy drawdowns.</p>
<p>Confirmed intermediate supports 14138-184, 14342, 14414-545.</p>
<p>New critical zone in area 13814-781. The loss of the volumetric zone 14069-13974 opens the way to monthly support in the 13621 area.</p>
<p>Monthly support in the 13621 area. The Dax left a huge volumetric gap after the FED’s inflation figures, easily penetrated at the loss of 13975.</p>
<p>Solid supports in the 13692-608, 13550-516, and 13457-410 areas. Confirmed support is around 13314-333, 13331-410, and 13438-467.</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 Oct 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 area 16446-487. Pretty much reached the annual target in the 16500 area. Beyond that, we will witness an attack on the 16700-17000 area.</p>
<p>If by the following Friday, prices remain above 16205, we could witness a chance for a continuation of a bullish movement on a monthly basis; below 15900, the trend will move strongly downwards again.</p>
<p><img decoding="async" loading="lazy" class="alignnone size-full wp-image-24682" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/Untitled-1915-×-840px.png" alt="" width="1916" height="840" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/Untitled-1915-×-840px.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/Untitled-1915-×-840px-300×132.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/Untitled-1915-×-840px-1024×449.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/Untitled-1915-×-840px-768×337.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/07/Untitled-1915-×-840px-1536×673.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>US30</strong> – Thanks to the purchases of the banking sector and the FED nearing the end of the rate hike cycle, the Dow Jones index reached the high of 18th January 2022 in the 35725 area, after breaking the key resistance at 35614 and holding above the weekly key level around 35294.</p>
<p>New supports in the area 35424-381, 35334, 35284. Confirmed 35218, 35152-068 and 35036-34981, which became weekly levels. The break of these volumetric zones could lead to strong bearish accelerations targeting intermediate supports located in 34936, 34824, and 34745 first and then towards the new weekly supports in the area 34612-569 and 34509-445.</p>
<p>34270, 34235-175, 34142-076 are again confirmed. Other supports can be considered 34000 and 33931-861.</p>
<p>Confirmed 33712-660 as monthly support and also 33559-434. The break of these zones could lead to strong bearish 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 area 32804 and 32725, monthly supports.</p>
<p>Additional supports in the following areas: 32499-632, the loss of which could lead to monthly trend reversals. Next 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.<br />
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 area 352452-517 and 35601-661. The break of this zone of monthly resistance could open the gateway to 36068, the new weekly target.</p>
<p>Monthly positioning of the price above 35599-963 would 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 could take off strongly for one additional rally before facing a bearish sideways phase, starting from the beginning or mid-August. We are probably experiencing the last bullish month before a break till September. Any downward that is supposed to recover quickly will be a good opportunity to re-enter long.<br />
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-31st-july-4th-august-24690/">DAX 40 & DOW JONES: weekly analysis 31st July – 4th August</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>