Key Talking Points:
- DAX 40 holds above resistance trendline as bulls attempt to gain the upper hand
- S&P 500 stages a healthy bullish rally
DAX 40 | SMALL DAILY GAINS TOWARDS 15,600
The DAX 40 is attempting to gather momentum for another break above 15,600 given recent resistance around this area. Upbeat mood is seemingly back in markets with Bitcoin’s recent rally likely a reason for more risk appetite, but growth and inflation concerns continue to cap the bullish momentum in stocks. The fact the index has managed to position itself above its descending trendline resistance is a good bullish signal in itself for the short term, but the daily candlesticks are showing a lot of indecision in their attempt to break higher, meaning that the climb is likely to be slow and painful.
From here, the bearish scenario would be if the DAX starts to see lower highs and lows towards 15,400, at which point the trendline resistance-turned-support around 15,320 would come into play. A slide below this line would likely mean the downtrend would continue, with the 15,000 mark likely being the key objective for bears. Alternatively, in the bullish scenario, buyers are able to hold on to the positive momentum at the start of the week and we see a few successive daily closes above 15,630, with the short-term target being a close above resistance at 15,790.
It is also possible, and somewhat likely, that the DAX 40 is unable to break ranges in the short term and sideways trading continues. If so, 15,400 – 15,600 looks like the most likely range as of now, which would keep the RSI in a neutral stance just below 55.
DAX 40 Daily Chart
S&P 500 | BULLISH TREND INTACT
The S&P 500 has staged a pretty impressive rebound since the lows seen on October 1st , having risen over 6.5% in just 16 trading days and reaching a new all-time high on Friday (4,560). There has been some pullback within that timeframe so the push higher has been pretty healthy and solid, meaning further momentum towards 4,600 could build pretty easily. The close on Friday left the index pretty flat which could be a sign of short-term concern, but even if bears take over it would only encourage buyers to come into the trade at around 4,500 given how the index has seen healthy pullbacks over the last few weeks.
Both the RSI and moving averages are pointing towards further gains in the coming weeks and with earnings season currently underway there is enough potential volatility for another move higher. So far, the number of companies that have beaten expectations in the third quarter is above 80% and with big tech companies reporting this week that number is likely to keep on rising. But there could be some turmoil for tech stocks ahead just as investors are moving away from the pandemic safe-havens towards cheaply valued stocks.
S&P 500 Daily Chart
— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin