Dow Jones, S&P 500, FTSE 100 and DAX 30 Fundamental Forecast
Dow Jones Fundamental Forecast: Bullish
Dow Jones, S&P 500, FTSE 100 and DAX 30 Fundamental Forecast:
- The Dow Jones and S&P 500 will look to Wednesday’s Fed rate decision to influence price action
- Similarly, the FTSE 100 will await a rate decision and commentary from the Bank of England
- The DAX 30 will look to equity counterparts in the US and Europe to guide sentiment while it hopes to avoid US auto tariffs
The Dow Jones faced a unique headwind this week when it’s largest component, Boeing, sank on news that a 737 Max 8 crash could be tied to software problems in the plane. Given Boeing’s considerable weight in the index, the Industrial Average lagged the other major US equity indices. In the week ahead, news out of Boeing will continue to influence the Average’s overall price.
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If the issues are quickly resolved, the Dow could outpace its S&P 500 counterpart on renewed strength in Boeing’s share price as it looks to recoup recent losses. A rate decision from the Federal Reserve on Wednesday will also impact the index.
Dow Jones Price Chart: 4-Hour Time Frame (September 2018 to March 2019) (Chart 1)
S&P 500 Fundamental Forecast: Neutral
Similarly, the S&P 500 will look attentively to Wednesday’s Fed decision. While no change in the interest rate range is expected, tone or “Fed speak” will remain critical. Any indication that the Fed may walk-back its recent dovish tone could prove bearish for US equity indices, particularly for the S&P 500 which has greater exposure to growth stocks than the Dow Jones.
Learn the differences between the Dow Jones and S&P 500 and how they might contribute to different outlooks.
Wednesday’s Fed decision could be make-or-break for the Dow Jones and S&P 500 which both trade near key technical resistance. According to a poll I conducted on Twitter, traders have a bullish leaning for the index next week. If you agree or disagree, visit @PeterHanksFX.to vote in the poll which will expire Monday afternoon.
S&P 500 Price Chart: 4-Hour Time Frame (October 2018 - March 2019) (Chart 2)
FTSE 100 Fundamental Forecast: Mixed
Not to be outdone, the FTSE 100 also faces technical resistance and will be accompanied by a rate decision from the Bank of England. After a week of whiplash from Brexit, the FTSE stands on relatively stable footing. However, recent BOE policy meetings have revealed the bank to be one of the more hawkish. In conjunction with the Federal Reserve, no change to rates is expected, but a hawkish tone from Governor Carney is well within reason. Such a development would likely prove bearish for the FTSE.
Likewise, the uncertainty of Brexit continues as businesses wrestle with post-exit operational plans. Given the recent leanings of the BOE but relative stability brought about by last week’s Brexit votes, my outlook for the FTSE is mixed.
FTSE 100 Price Chart: 4 – Hour Time Frame (August 2018 – March 2019) (Chart 3)
DAX 30 Fundamental Forecast: Bullish
Unlike the other indices, Germany’s DAX lacks significant event risk next week. Consequently, it will likely take its cues from the dominant mood in its equity counterparts. Barring an announcement from the United States regarding auto tariffs, the fundamental outlook appears rosy for the DAX. However, a technical view of the index suggests the index’s outlook is neutral at best.
DAX 30 Price Chart: 4 – Hour Time Frame (June 2018 – March 2019) (Chart 4)
One thing to watch for all European equities is the European Council meeting in Brussels on Thursday and Friday. Officials are slated to discuss a laundry list of economic issues ranging from unemployment to trade policy regarding China. While the event is unlikely to deliver immediate concrete changes, commentary from various EU officials should be watched closely and could influence price action.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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