#INDICES Forecast: #NASDAQ,#DAX & #SP500 (13 SEPTEMBER 2022)

DAX Forecast: Rallying on Optimism

The German index rallied significantly on Monday to gain roughly 2%. The market is likely to see a lot of resistance just above, so having said that it’s likely that we will eventually see sellers come back into this market. The market is likely to see a lot of noise just above, because there are a lot of concerns when it comes to the European Union.

Selling Pressure Ahead

Looking at this chart, you can see that the DAX broke above the 50-Day EMA, which is a bullish sign, but all things being equal this is a market that will eventually see plenty of selling pressure. The 200-Day EMA sits at the 14,000 level and is dropping. Ultimately, the quicker we get there, the more likely it is that we are going to see a massive turnaround. The market is likely to see a lot of pressure sooner rather than later. After all, one of the biggest reasons for the rally during the session on Friday with the fact that Ukraine has made gains against Russia on the battlefield.

While that of course is a good thing for the European Union, the reality is that there are a lot of bad things coming to the European Union rather quickly. During this winter, there will still be concerns about natural gas supply, and of course, the massive amount of inflation that is out there. I still think this is going to be seen as a relief rally, but it’s also worth noting that the 12,500 level has been a massive support. With that in mind, that could end up being a bit of a “floor in the market” when it comes to the DAX.

If we break above the 200-Day EMA, then it’s likely that we would see a significant rally at that point, as it is technically the beginning of an uptrend. Whether that’s going to be the case is completely unknown at this point, but it is certainly a real possibility.

• If we take out the bottom of the candlestick for the Monday session, then I think we probably had back toward the lows again.
• You cannot take risk appetite overall out of the equation.
• This has been a little bit overdone, so the next couple of days could be noisy.

NASDAQ 100 Forecast: Climbing the Wall of Worry

• The NASDAQ 100 has rallied a bit during the trading session on Monday as we see a lot of volatility out there.
• The US dollar took a bit of a break from its bullish run, and that has helped the overall situation, but at the end of the day, the NASDAQ 100 is still going to see extreme bits of volatility.
• Volatility is most certainly not your friend when it gets out of hand. Because of this, we are more likely than not going to see the NASDAQ run into a major selloff sooner rather than later.

Changing Overall Market Structure

The 200-Day EMA sits at roughly 13,250, and we would need a break above there to make a true statement and change in the overall market structure. While things do look rather bullish in the short term, the reality is that the rallies tend to be very low liquidity, and in thin volume. This does not suggest confidence long term. In fact, I think it’s probably a situation where you have a lot of uncertainty waiting to bubble to the surface.

If we break back below the 12,600 level, then I think we end up going back down to the 12,000 level. The 12,000 level course has a certain amount of psychology attached to it, but at the end of the day, I don’t necessarily think that there is anything particularly important about it other than the fact that we bounce from there previously. That would make it essentially a short-term support level, but macroeconomics dictate that we are going to continue to have a lot of issues, to begin with. Because of this, I think we have a situation where the market still is one where you want to fade exhaustion, but we just have not seen it play out yet.

Keep in mind that there are only a handful of stocks moving the NASDAQ 100 at any time, so pay attention to all the usual suspects that most flunkies own. This would be Tesla, Microsoft, Amazon, etc. The lack of volume has had these market stalwarts truly make an outsized impression yet again. While that’s not necessarily anything new, it’s especially true in these low-volume environments. With the CPI numbers coming out on Tuesday, you can expect a lot of volatility during the day.

S&P 500 Forecast: Stocks Bounce on USD Weakness

The S&P 500 rallied a bit during the trading session on Monday as the US dollar lost a little bit of strength. It is more likely than not going to be a short-term relief rally that is continuing from last week than anything else. When you look at the E-mini contract for the S&P 500, we are getting a bit stretched, and the 4100 level is where you expect to see a resumption of resistance. Short-term bounces like this can be quite brutal in a bear market, so none of this should be overly surprising. In this environment, I believe that we are looking at a bear market rally more than anything else because the bigger picture has not changed.

• Look at the chart, the 50-Day EMA offers support, and if we were to break down below there I think that a lot of technical traders would start selling again.
• The next support level underneath there would be the 4000 level, which would attract a lot of attention as it is a large, round, psychologically significant figure.
• We recognize that the market is overdone yet again, which seems to be a reoccurring theme.

This is one panic driven move after another, and the fact that we do not have a lot of volume on most days certainly does not help the situation. This is simply an example of algorithms playing games and low liquidity.

CPI numbers come out on Tuesday, and a lot of people are going to be paying close attention to them. This will be especially true for the Core CPI, but at the end of the day the Federal Reserve has already stated that it’s going to tighten monetary policy. I think that the CPI numbers at the end of the day won’t truly matter. In this scenario, it’s very likely that we see more of a “fade the rally” attitude in this market going forward. In fact, it’s not until we get a daily close above the 4200 level that I think the buyers will have finally turned things around for more significant move. This has been a rather sharp turnaround, but that’s nothing new at this point in the game.

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