#INDICES ANALYSIS: #DAX30,#SP500,#FTSE100 (25 MAY 2022)

 

DAX Forecast: Respecting Negative Channel

At this point, I think you need to pay close attention to momentum and other indices as they all tend to move in the same direction over the longer term.

The German DAX index pulled back a bit Tuesday after initially trying to rally. The Tuesday session in the DAX has initially tried to break above the 50-day EMA but struggled to continue. At this point, the market is likely to continue to see a lot of back-and-forth action, but as we are at the top of the bearish channel, it’s likely that we would see sellers continue to cause issues.

If we break down below the bottom of the candlestick for the trading session on Tuesday, it’s likely that we will see a move to the downside. On the other hand, if we were to break above the €14,250 level, then it’s possible that the DAX may recover, perhaps reaching toward the 200-day EMA which is at the €14,750 level. Regardless, I think the one thing you can probably count on is a lot of volatility, so you need to be cautious with your position size. I think we are going to continue to have to pay close attention to statements coming out of the ECB, because if they start to sound more and more hawkish, then that will put more downward pressure on the DAX.

At this point, I think you need to pay close attention to momentum and other indices as they all tend to move in the same direction over the longer term. If other indices around the world start to fall, that will drag the DAX right along with it. The market has been grinding lower since the beginning of April, and it’s possible that we will continue to see a lot of this through the summer as the world tries to figure out supply chain issues, and of course inflation.

S&P 500 Forecast: Index Bounces After Initial Selloff

I look at every rally as an opportunity to get short yet again as soon as we see signs of exhaustion.

The S&P 500 bounced significantly from the 3900 level, which is a large, round, psychologically significant level, and an area where we’ve seen a little bit of support. By the end of the day, we ended up forming a bit of a hammer, so I think we are going to enter a bit of consolidation in this area. The 4100 level above is resistance, and therefore I think we are going to bang around in this 200-point range in the short term.

If we were to turn around and break down below the 3800 level, it would break down below the recent low, and of course the bottom of the hammer from a couple of sessions ago. If that does get violated, it’s likely that we will continue to go much lower. It’s worth noting that we had recently formed the so-called “death cross”, which is when the 50-day EMA crosses below the 200-day EMA. Quite often this is a very late signal, but a lot of people will pay close attention to it. Ultimately, I think this is a market in which if you get a bit of a rally, you have to be looking for signs of exhaustion to jump upon. Even if we broke above the 4100 level, there is significant resistance at the 50-day EMA, as well as the 4300 level. If we were to somehow break above that 4300 level, then it’s likely that the market will go much higher. Until then, I look at every rally as an opportunity to get short yet again as soon as we see signs of exhaustion. Forward guidance by a lot of CEOs on Wall Street has been miserable, and I think that continues the way up on the index as well.

FTSE 100 Forecast: Index Continues to Grind Back and Forth

I believe at this point you are more likely than not going to see choppy and destructive behavior more than anything else.

The FTSE 100 rallied a bit on Tuesday to reach the 7500 level, but it is worth noting that we have seen quite a bit of compression as of late and volatility. This is a chart that is getting ready to see a potentially big move, but we need to define which direction we are heading in, and I believe we will see that in the next couple of daily candlesticks.

Alternately, you could make an argument for a down-trending line that we are paying close attention to, so we could drop down to the 7400 level, possibly even the 7200 low water lead. The market has been extraordinarily volatile, and that typically does not bode well for buyers. That being said, it’s worth noting that every time we have fallen, there has been a significant push to the upside in an attempt to recover, so I think we will continue to see a lot of compression and we are due for some type of expansion move.

The candlestick for the trading session on Tuesday is rather bullish-looking, but it also is worth noting that there’s a lot of noise just above. Because of this, I think we will continue to see more confusion than anything else. This is a market that had been in a massive uptrend for a while, but we are starting to see a lot of confusion, so at this point, it’s likely going to be a situation where you need to be cautious with your position size, and of course risk management. I believe at this point you are more likely than not going to see choppy and destructive behavior more than anything else. However, the market will continue to build up pressure in order to make a decision.

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