DAX 40 & DOW JONES: Weekly analysis 7th – 11th August

<h2>Market movers</h2>
<p>Last week, Fitch decided to downgrade the US credit rating from AAA to AA+ due to “fiscal deterioration”. This provided the perfect justification to trigger a market reversal. Despite this, the S&amp;P500 is up for the fifth consecutive month with a return of 3.1% in July, thanks to the improvement in sentiment in the stock markets.</p>
<p>The week is less packed with macroeconomic and corporate data compared to previous weeks.</p>
<p>On Monday, 7 August, we will have the quarterly earnings of Palantir Technologies, a diamond of the tech sector which has gained more than 200% since the beginning of the year thanks to the buying frenzy for AI stocks. Palantir Technologies posted performances second only to Nvidia.</p>
<p>On Tuesday, 8 August, we will evaluate inflation data for Germany, which are important in influencing the choices of the ECB in monetary policy.</p>
<p>On Wednesday, 9 August, we will have Disney’s quarterly earnings.</p>
<p>Thursday, 10 August, we will have more data on inflation coming from the United States. Above all, it’s very important to monitor the trend of the consumer price index in the US in order to understand the next moves of the Federal Reserve and whether there will be a prolonged pause in the cycle of interest rate hikes.</p>
<h2>Analysis of the week and scenarios for DAX and Dow Jones</h2>
<p>Last week, we highlighted an exciting aspect. After the Dow posted thirteen consecutive sessions with higher closures than the previous ones, a pattern never recorded before, now the bulls seemed to have exhausted their push, which then promptly occurred. So, is a bearish wave ready to hit the US stock markets? In the short term, a retracement could be very likely. In the medium term, however, markets are still poised to rise, at least as long as the support levels hold.</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.</p>
<p>Everything occurred as we predicted, and between September 2022 and March 2023, all international markets posted their lows for the moment (which could also be the ten-year lows).</p>
<p>A bearish swing has formed this week, a pattern that in 82% of cases will bring declines of at least 7/10% from the maximum posted pre-crisis. We will monitor its evolution.</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 closed with a strong decline, after having tested the resistance at 4617-4622, and closing Friday in the 4498 area.</p>
<p>New supports in area 4498-494. From this last level, if forcefully lost, a major correction could really begin. Next, supports in the 4463-4453-4436 area, which is also the weekly support zone. 4429-4420 is confirmed. 4418 and 4403 is also confirmed. Other support in area 4394 and critical 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.</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 area 4505 and 4524-4534-4550 which becomes the new weekly resistance level. Additional resistances in the 4564, 4575-4580 areas and the resistance that offers a new bullish strength in the 4595-4607 area. Confirmed resistances 4617-4622 and 4629-4632.</p>
<p>The upside targets remain 4662 and 4680, from where important resistances are arising before the possibility of witnessing new historical highs.</p>
<p>The weekly closure above 4613 guarantees the annual trend reversal if confirmed on a monthly basis; the next targets remain 4717 and 4780.</p>
<p>How to move? The downtrend in the markets could last until September but be careful of what could happen the current week. What could immediately change the variables in the markets? Certainly, an inversion between Monday and Tuesday. It s important to monitor the weekly supports and resistances.</p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-24836 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-69.png" alt="" width="1916" height="840" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-69.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-69-300×132.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-69-1024×449.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-69-768×337.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-69-1536×673.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>DE40</strong> – Last week, the German index posted a solid bearish path after Tuesday, opening in a gap down, below 16264. It violently broke all supports and closed below support 15973-900 on Friday.</p>
<p>New supports in area 15832. Confirmed the 15814-749, 15631, and the weekly support 15596-439. Supports in areas 15439, 15368-308, and 15287-247 confirmed. 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 the 15856-901 and 15913-958 areas. Breaking these levels could lead to a swift rebound to the weekly resistance in the 16225-253 area, where last Tuesday’s gap will be filled. Other resistances in the 16272-335 area, the breaking of which can lead to the annual highs in the 16517-475 area.</p>
<p>If by the following Friday, prices remain above 16289, we could witness a chance for a continuation of a bullish movement on a monthly basis; below 15932, the trend will move strongly downwards again.</p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-24833 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-70.png" alt="" width="1916" height="840" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-70.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-70-300×132.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-70-1024×449.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-70-768×337.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Untitled-design-70-1536×673.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>US30</strong> – Last week, the index narrowly missed the 14th consecutive daily gain that would have marked an astonishing record. The Dow failed to break the highs of the end of July and posted a violent correction, after the downgrade of Fitch last Tuesday. On Friday, the index touched the weekly support at 35036-34981, with a drawdown of almost 700 points in 5 sessions.</p>
<p>35036-34981 is confirmed. 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, and 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.</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 are placed in the 35068-135 areas. A break of this resistance could lead to a quick bounce to 35284-328. Next resistances in area 35363-385, 35411-465. From here, a new upward lunge could begin with the target resistance at 35539-591 and 35620, where last Tuesday’s gap could be filled. Final resistance in 35673-715 area.</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 just started to fall, as we forecasted in early August. If there won’t be strong breaks of the weekly resistances, the pullbacks, even violent ones, will be excellent opportunities to re-enter in long positions. Avoid entering during breakouts and wait for the prices, after the pullbacks, to start showing a clear downward movement. The volatility remains high, so avoid any entries with a high probability against it.</p>
<p>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.</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-7th-11th-august-24845/">DAX 40 & DOW JONES: Weekly analysis 7th – 11th August</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>