DAX 30 and S&P 500 FORECAST: BULLISH
- NFP data leaves investors concerned about the tapering timeline
- Key levels to watch for the DAX 30 and S&P 500
The latest reading on NFP data has been disappointing. There were only 235 thousand jobs created in the US in August, when analysts were expecting at least 750 thousand, following on from July’s reading of 943 thousand, later revised to 1.053 million. Stocks pulled back slightly when the headline figure came out, but a deeper look into the data showed that it wasn’t all disappointing as the unemployment rate fell from 5.4% to 5.2% and wages were firmer than the previous month.
The play for equities at the moment is slightly confusing as a weaker NFP means that there is a greater chance that the tapering of assets will be pushed back by the Fed, meaning more liquidity for longer, but it can also be seen as a worrying sign that the economic recovery is losing momentum. Either way, stocks seem to have only one direction at the moment and that is up, even if a pullback is needed to cement further bullish momentum.
On the calendar next week there are a few central bank meetings to look out for (RBA, ECB, BOC) as well as some inflation data but I would expect equities to continue to react to the latest US jobs report heading into the next week, which is shortened due to a bank holiday in the US on Monday, as investors weigh up the possible effects this may have on the Fed’s tapering timeline.
DAX 30 KEY LEVELS
The pullback in the DAX 30 has intensified to end the week and the German index is now fighting to keep sellers away at the 50-day SMA. There is probably some further weakness left before a rebound happens and so the 15,600 area is looking good for support in the short term, whilst the 127.2% Fibonacci extension (15,424) is the level to look out for if a bearish reversal is in play. If, and when, buyers regain control of the DAX 30 the 16,000 continues to be the tough challenge ahead as there have been several failed attempts to consolidate above this target area and achieve a new all-time high.
DAX 30 Daily Chart
S&P 500 KEY LEVELS
Once again the S&P 500 has been the key standout this week and has continued to reach new all-time highs despite sentiment coming down a touch. The index has flatlined a little bit around 4,530 area but momentum continues to strong bullish support in the short term. That said, the S&P 500 is slightly extended over its ascending trendline and so we may see a pullback towards it before more buyers pile in, so a dip below the 4,500 level next week may be on the cards.
S&P 500 Daily Chart
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--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
