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Technical Forecast for Dow, S&P 500, FTSE 100, DAX and Nikkei

Technical Forecast for Dow, S&P 500, FTSE 100, DAX and Nikkei

2018-10-20 16:00:00
James Stanley, Currency Strategist
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Equities Talking Points:

- Dow and Risk Trends Deflate as Brexit and Italy Override Netflix Earnings.

- Dow Jones Attempts to Build From Base of Chart Support.

- Are you looking for longer-term analysis of Equity prices? Check out our Quarterly Forecasts as part of the DailyFX Trading Guides.

Support Begins to Show After Bearish Start to Q4

It was somewhat of an encouraging week for equity bulls, and not from anything specific that happened as much as what didn’t take place. The aggressive sell-offs from last week appeared to garner a bit of support; and while price action is far from the bullish trends that were driving US stock markets as we wound down Q3, the fact that the selling slowed while support began to show is an item of positivity after the global risk sell-off from the week prior.

Equity markets are not yet out of the woods, however, as all that’s shown at this point is a hold of support. Continued bullish price action can help to bring back those top-side trends, and below I look into a series of global equity markets in the effort of finding the most amenable areas for either a continuation of or reversal from this recent bout of risk aversion.

Dow Holds Support, Bulls Fail to Provide Lasting Push

Last week’s technical forecast initiated a bullish outlook for the Dow Jones Industrial Average, and prices this week put in a small gain while holding on to last Friday’s bounce. So, it was far from the rip-roaring rally that was seen in Q3, but the fact that last week’s sell-off took a step deeper into the rearview mirror is an encouraging first step for bulls. Earnings season continues in the United States with a number of big names reporting next week, and this will likely continue to carry impact to equity prices.

In the Dow, the big question is whether this week’s hold of support continues and whether bulls make a more confident push. This week’s price action found resistance at the 38.2% Fibonacci retracement of the Q3 bullish move, and support has continued to hold around 61.8% marker. For next week, the outlook will be held at bullish, and that will remain until last week’s low around 24,900 gets taken-out.

Technical Forecast for the Dow: Bullish

Dow Jones Daily Price Chart

Dow Jones Daily Price Chart DJIA DIA

Chart prepared by James Stanley

SPX Grasps on to Support After Last Week’s 78.6% Retracement

Last week’s sell-off in equities was a bit more pronounced in the S&P 500, leading to last week’s neutral outlook in the forecast. And in the week prior, prices had fallen below a key trend-line that held the lows in the index for the entirety of Q3. Similar to the backdrop looked at above in the Dow, the S&P spent most of this week trying to cauterize support above last week’s swing-lows. Those swing-lows are a bit deeper relative to the Q3 bullish trend than what was seen in the Dow, however, as support showed-up around the 78.6% retracement of that prior major move.

This week’s bounce found resistance at the 50% marker of that major move in contrast to the Dow finding resistance at the 38.2% marker of its similar move. So, deductively, the S&P would appear a lackluster option for bullish equity plays and thus, the forecast will remain at neutral here for next week.

Technical Forecast for the S&P 500: Neutral

S&P 500 Daily Price Chart

SPX 500 Daily Price Chart spy es

Chart prepared by James Stanley

FTSE Bounces Up to Fibonacci Resistance Zone

Last week’s neutral forecast in the FTSE 100 was brought upon by the fact that an oversold market had just rushed down to fresh lows; and while the down-trend appeared in order, entry relative to chart position was of a challenge. Last week’s forecast looked for an area of resistance at the expanse between the 76.4 and 78.6% Fibonacci retracements of the March-May major move.

This came into play on Wednesday, at which point sellers responded to push prices lower; but sellers slowed down ahead of prior support, and this has led to an upward sloping trend-line produced by the past week’s lows, and this is something that could bring a larger bullish move before the bigger-picture bearish trend might be ready to come back. For next week, the forecast for the FTSE will be held at neutral.

Technical Forecast for the FTSE 100: Neutral

FTSE 100 Daily Price Chart

FTSE 100 Daily Price Chart

Chart prepared by James Stanley

DAX Holds Support at 18-Month Lows

Last week’s bearish forecast in the DAX was brought-upon by the pair’s bearish move off of resistance that was looked at in the week prior. The bearish move thus far in October has pushed prices down to fresh 18-month lows, and this comes amidst a difficult backdrop for the index, as bearish price action has been showing to varying degrees since early-June. This is when a bearish trend-line begins and throughout the summer and into the fall, this has helped to hold the highs in the DAX. For next week, the forecast on the DAX will remain at bearish.

Technical forecast for the DAX: Bearish

DAX Weekly Price Chart

DAX Weekly Price Chart

Chart prepared by James Stanley

Nikkei Grasps on to Trend-Line Support After Breakout Retracement

The past couple months have been particularly eventful for the Nikkei. Coming into September, prices had built into an ascending triangle formation, and this filled-in in a very big way last month as prices broke-out from the 50% marker of the 28-year move on the index. Within a couple of weeks, prices had already perched up to fresh 27-year highs, and that enthusiasm lasted into the first couple days of Q4.

But, as worries began to permeate risk markets, prices started to pull back alongside American indices, and the past couple weeks have seen an eradication of most of those prior gains.

At this stage, the Nikkei appears to be in a tenuous spot. This week’s price action produced a lower-low from last week’s support, and a Doji printed this week right at trend-line support, and short-term resistance came in a the prior breakout level, around the 50% marker of that major move spanning the 1990 top down to the 2008 bottom.

This opens the door for bullish reversal plays after the sell-off of the past three weeks, and for next week the forecast will be set to bullish on the Nikkei.

Technical Forecast for the Nikkei: Bullish

Nikkei Weekly Price Chart

Nikkei Weekly Price Chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

Other Weekly Technical Forecast:

Australian Dollar Forecast: AUD/USD in Consolidation. GBP/AUD Risks Reversal, AUD/NZD More so

British Pound Forecast: Higher Prices Unlikely

US Dollar Forecast: Can the Dollar Draw from EURUSD, USDJPY to Return to 15 Month Highs?

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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