Dow Jones, Nasdaq 100, S&P 500, DAX 30 Forecasts for the Week Ahead

Dow Jones, Nasdaq 100, S&P 500, DAX 30 Forecasts: Neutral

• The Dow Jones, Nasdaq 100 and S&P 500 will look to build on strong earnings as the season continues
• Price may struggle to climb higher, however, as seasonal headwinds work against sound fundamentals
• The New DAX Decade: The Past, Present and Future of the DAX 30

Dow Jones, Nasdaq 100 andS&P 500 Forecasts for the Week Ahead

The Dow Jones, Nasdaq 100 and S&P 500 enjoyed considerable gains in the month of April as the three indices climbed roughly 2.5%, 5.4% and 5.2% respectively. Built atop sound economic groundwork, strong corporate earnings and an accommodative Federal Reserve, a strong fundamental landscape has been laid for each of the US indices and they may look to continue higher in the weeks ahead as a result. That said, optimistic investors will have to juggle an encouraging backdrop with strengthening seasonal headwinds.

S&P 500 Seasonality Chart

To that end, monthly S&P 500 returns have outpaced historical performances in the year-to-date thus far, but the month ahead could see topside progress slow considerably. Since 1990, May has seen lower returns compared to April alongside continued declines in volume and volatility.

Further still, more seasoned traders and investors may remember the mantra “sell in May and go away” which spoke to broader equity market weakness in the month. Evidently, stocks have seen an improved performance during May in recent years, but the month still possesses a new set of challenges for traders relative to the first quarter which will see encouraging economic readings and corporate profitability butt heads with lower market activity.

As a result, the Dow Jones, Nasdaq 100 and S&P 500 may see gains slow in favor of consolidation after months of bullish progress. Should consolidation occur, it may allow valuations to cool and the oddities of covid-induced base effects in earnings and other data to pass. All in all, the outlook of US corporations and the economy appears rosy, but it is hard to suggest considerable gains are in store in the weeks ahead.

DAX 30 Forecast for the Week Ahead

Much of the same can be said for the DAX 30. Economic data for the German economy is largely upbeat despite ongoing coronavirus uncertainty in Europe and gradual reopening procedures continue to foster risk appetite. Still, European equity markets are not immune to the effects of seasonality and the DAX 30 runs the risk of slipping into tepid price action in the weeks ahead.

DAX 30 Price Chart: Daily Time Frame (January 2020 – May 2021)

Without new catalysts, the German equity index may linger around recent levels if not modestly higher. While such price action is considered less than ideal for many traders, it can open the door to range trading strategies. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Strategist for DailyFX.com