DAX Outlook As ECB Looms, S&P 500 Levitating While FTSE Seeks Resolution

S&P 500

There a few ‘high’ impact data points coming up next week, but may have minimal impact on stocks, with the US dollar making the biggest moves on the releases. On Wednesday, US Durable Goods Orders is due out, Thursday brings Advance Goods Trade Balance, and likely to have the most impact is Q3 GDP on Friday. See the economic calendar for details.

As noted on Friday, the upward march in stocks was threatened only mildly and momentarily on Thursday. The market caught a bid at support by way of a pair of trend-lines, one rising off a swing-low created in August and another top-side trend-line extending higher since June which was overcome earlier in the month. The grind higher doesn’t present good risk/reward for fresh longs at this juncture, but until we see a strong reversal in momentum shorting is even less appealing.

S&P 500: Daily

DAX

Looking ahead to next week, the big event of the week will be the ECB meeting on Thursday, where the market looks to gain insight into the central bank’s plans with its current QE program. Outsized volatility could certainly result from the outcome. The euro will likely react the strongest, but given the inverse correlation it has with major European indices, look for that to reflect in the opposite direction in equities. For details on timing and other data releases, please see the economic calendar.

Last week, the DAX continued to struggle around the pair of long-term trend-lines (2000/’15, 2015-current). It’s a pivotal spot as the market hangs suspended in air after rallying over 10% from the late-August low. A period of consolidation or a pullback would do some good for working off overbought conditions. A decline below 12909 will bring a pullback into focus, with 12676 as the first notable level of support. On the top-side, the pair of aforementioned trend-lines continue to be a headwind.

DAX: Daily