Market Analysis - DAX, S&P 500 and VOESTALPINE

Nothing really happened on Monday. At the XETRA DAX you can see another indecision candlestick (inverted hammer).

As I mentioned in the weekend blog entry I am looking for a pullback back to 6650 to 6700.


The S&P 500 also did nothing yesterday. It was a low volume day and the hourly trendline which I emphasized in the post on Saturday was not hurt either.

The recently mentioned VOESTALPINE is going straight up maybe until the € 38 level.

Weekend Outlook - SPY, QQQQ, DAX and ATX

Despite the disappointing jobs report the indices closed in positive territory on Friday.
First let's take a look at the SPY (ETF which tracks S&P 500).
On the daily chart you can see the downtrend from April until July. This trend was retested around support at the 104 level in August. Afterwards the uptrend until November started. This uptrend broke two weeks ago and was retested during the last two trading sessions, like in August right around former resistance. That would be the bearish case for the stock market. The bullish case would be that the SPY retested the 50 day moving average around 118 and started the next leg of the rally. Technically we are at a critical level.

The hourly chart of the SPY shows the break of the upward trendline even better. Yesterday the SPY completed the retest and what is very important for every short-seller out there that none of the three big US-Indices took out the highs of November.

The QQQQ (ETF which tracks the NASDAQ 100) did not retest the former uptrend and is still forming a potential bear flag. Only if the QQQQ takes out the November highs this scenario is off the table.

The hourly chart shows that the QQQQ is at its upper trendline and seems to be a little bit overbought.

The German DAX and the EUROSTOXX 50 were forming a negative doji star formation with a long white/green candle on Thursday followed by doji candle on Friday.
Further the DAX is just around the long term upper trendline which is very strong resistance.
A break below 6650 would indicate a retest of the breakout area around 6350.

The ATX (Austrian Traded Index) also run into resistance around 2750 to 2800 and now is forming some kind of a broadening top which usually occurs after an uptrend and is a reversal pattern.

The higher participation of private investors typically is a sign of a market top. Many sentiment indicators are at multi-year highs. The German TecDAX sentiment indicator for instance shows 65% of the private investors are bullish and just 20% are bearish. The AAII-Sentiment Survey shows similar results and the DAX sentiment too. In conclusion I think it is difficult to push the stock market above these strong resistance levels with such a bullish sentiment.

As always, please feel free to leave comments!

NASDAQ 100 and Cisco Systems

The Nasdaq 100 is like the other US-Indices at a critical level around the November highs. It had two very strong sessions but the volume was not impressive. Furthermore the Nasdaq 100 is near its 2007 highs. That means very strong resistance ahead and after today's disappointing jobs report the futures are indicating a lower open. So could that be a potential double top? Yes definitely, but as I mentioned in a post a few days ago, the saver play would be to short if the lows of the last two weeks are broken.

The Cisco chart shows a long term sideways range. From the top 2007 till the low 2009 it had a  downtrend channel and since April 2010 Cisco also established a similar downtrend.

In a shorter timeframe Cisco could bottom out just above the $ 19 level. A fibonacci level is around $ 19 and also bottom trendline of the channel is just around $ 19. But that does not mean to get aggressive long because it could drift further down. On the other hand shorting is also risky too because it has support around $ 19 and is oversold.

Technical Picture of the Stock Markets - DAX, EUROSTOXX, DJIA and S&P 500

The German DAX finally managed to get above the 6900 level on a closing basis. Nevertheless the volume looks to be pretty low for a breakout-day. Moreover a very key resitance level is around 6960 to 6975 namely the trendline from October 2009 which limited every rally till now. Maybe we could jump above it just to test the psychological number of 7000 points but I personally think this trendline holds this time too. Another reason to be slightly cautious is that the DAX today lagged yesterday and today against the EUROSTOXX 50 whereas in the weeks before the DAX constantly outperformed the EUROSTOXX 50.

Also the EUROSTOXX reached a fibonacci retracement level which was also resistance in May and June. On Tuesday the index was much oversold so this bounce is not very surprising.

The breakout of VOESTALPINE AG worked pretty well so far and also if you got the S&P or DJIA breakout it could be time for profit taking.

Both the S&P 500 and the DJIA are reaching resistance around the November highs. A break there would indicate more upside. You should also consider in your trader tomorrow's jobs report, a positive number could certainly lift the market another leg higher.

In conclusion the four mentioned indices are all running into more or less strong resistance level which could be a shorting opportunity but a break especially in the US-Indices would indicate more upside even in the European Indices.

SMI (Swiss Market Index) and Nestlé (CH0038863350)

Let's take a look at the SMI (Swiss Market Index). The picture looks similar like the Eurostoxx 50 chart.

Since mid April the SMI dropped nearly 15% till July and since then it is forming a potential bearish flag (rising channel after a decline). On the one hand you could trade the channel with a well defined stop underneath the trendline or on the other hand you could trade a breakout of the channel to the downside.

The stock with the highest weighting in the SMI is Nestlé. The chart of Nestlé shows a nice breakout in November and now a retest of the former resistance level between 54 and 54.5 CHF. This is a very critical level because it is also the high of 2007. For further upside Nestlé has to hold this level.

The rising triangle would indicate a price target of 60 CHF.

As you can imagine with a weighting of approximately 23% the action in Nestlé is crucial for the SMI.