Summary:
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Stock indices look to consolidate after recent declines
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Markets have recovered some of last week’s losses
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A closer look at the US500, DE30 and UK100
There’s been some big moves seen in stock indices of late, with the markets looking to recover in recent sessions after last week’s large declines. In this analysis we will look at three of the most popular markets and review the current technical situation for the S&P500, DAX30 and FTSE100:
S&P500 (US500 on xStation)
This market is currently at an interesting level with the last two days showing some positive price action. Tuesday saw a large rally of more than 2% with price surging back to the 8 period EMA (blue line). Yesterday saw some weakness in the mid-afternoon but buyers stepped in and price recovered well to end the day little changed with a large wick beneath evident on a D1 candle. The range seen on Wednesday could provide important levels to look to going forward with the low around 2783 potentially key support and the high of 2824 offering some resistance. A break below 2783 would put the market back under pressure and open up the possibility of a retest of the recent lows around 2712. Alternatively a clean move above 2824 would offer longs the chance to recoup more of the declines and look to the next swing level around 2850 - a region that also coincides with the 21 period EMA (yellow line). Bulls would like to see price get back above 2873 before this sell-off can be deemed over, and preferably this would be accompanied with a bullish cross on the EMAs (8 above 21).
The US500 has paused after the recent bounce with possible support found at 2783 and potential resistance at 2824. A break outside either of these could well lead to the next sustained move. Source: xStation
DAX30 (DE30 on xStation)
The leading German benchmark has showed some signs of recovery after sustained declines but recently ran into resistance around a key fib level. The cluster of 38.2% (11788) and 41.4% (11822) can be seen as a key line in the sand for this market with the first foray into the region being met with a firm rejection and a bearish engulfing candle on H1. Price promptly fell back around 150 points but it has since recovered, holding above support around the 23.6% (11633). A break above the 11822 would pave the way for a further rally with the 61.8% at 12038 a possible target. However, unless this happens then the market remains susceptible to further declines and if price falls below recent lows around 11635 then a retest of 11383 can’t be ruled out.
The region between the 38.2% and 41.4% fib is a key swing level to keep an eye. Unless the market can make a clean break above here then the bears remain in control of the tape and a retest of the lows around 11383 is possible. Source: xStation
FTSE100 (UK100 on xStation)
UK stocks haven’t enjoyed as larger bounce as their US and German counterparts since making a low last week. This can be seen one of two ways; either they are weaker and traders more reluctant to buy or they have a greater potential to catch up should risk sentiment in general improve. The H1 Ichimoku cloud can often be seen to indicate the short term trend and in getting back above here it could be seen to have turned higher. As long as the market doesn’t drop below the bottom of the cloud (currently around 6993) then further gains are possible. Note that a break above the cloud this time last month led to a rally of around 250 points while the drop below the cloud at the start of October preceded the large declines of more than 500 points. Like all technical analysis, there can be false signals (like the one seen when price broke higher before the big drop) but if risk is managed appropriately this indicator can be used to identify short-term trend changes.
The UK100 has moved back above the cloud on H1. Crosses above/below the cloud have previously led to sustained moves and as long as price remains above it (currently 6993) then further gains may lie ahead. Source: xStation
