After doubts about the increase in inflation, the indices were bouncing hard at the week’s close
After the setbacks carried out by the main indices during the second half of February, the months of March and April were relatively calm with rises in the main stock indices thanks to good macroeconomic data and progress in the vaccination process. Such developments have improved the future prospects for economies, after the crisis caused by Covid-19.
During the month of May, we have seen how volatility has been reinstalled back in the markets. This is due to the return of doubts about rising inflation in the United States and the possible future consequences, with the markets registering sharp falls, especially during the first part of last week. However, the indices did manage to recover, with rebounds during both Thursday and Friday.
DAX30 Technical Analysis
If we look at the daily chart, we can see how in recent months the DAX30 has maintained a clear upward trend that increased after the break of the upper band of the green lateral channel, which acted as its main resistance in strong lateral movement that it had between July until mid-December.
This break led the price to mark historical highs, which the price practically respected during the months of January and February in a lateral movement. This was finally surpassed upwards on March 8 after being supported successively by its moving average of 18 periods, which has led to it currently being listed above 15,300 points, near their current highs.
Source: Admiral Markets MetaTrader 5. DAX30 daily chart Data range: January 7, 2020 to May 17, 2021. Prepared on May 17, 2021 at 12:45 CET. Keep in mind that past returns do not guarantee future returns.
If we look at the H4 chart, we can see how after marking all-time highs on April 16, the price began a stabilisation phase in the form of a lateral movement between the short-term downtrend line and the formation of a double bottom around 14,810 points in the red, which currently acts as the main support, and from the price it bounced strongly in search of the downtrend line.
The breaking of this resistance level could open the doors to a new bullish attack at its current historical highs, while a failure in this attempt could lead to the formation of a double top that could possibly lead the price to continue with this lateral movement. The break of its current support level could open the doors to a further correction in search of its long-term trend line.
Source: Admiral Markets MetaTrader 5. DAX30 H4 chart Data range: February 23, 2021 to May 17, 2021. Prepared on May 17, 2021 at 12:40 p.m. CET. Keep in mind that past returns do not guarantee future returns.
Evolution in the last 5 years:
- 2020: 3.6%
- 2019: 25.48%
- 2018: -18.26%
- 2017: 12.51%
- 2016: 6.87%
Technical analysis NQ100
As we mentioned during our analysis in March, the Nasdaq has been the index that has suffered the most from the increase in volatility, caused by the fear of increased inflation in the United States, the yield on bonds and the possible measures that the Federal Reserve may take in the matter of interest rates. This is due to the fact that the increase in the cost of financing directly affects the technological companies, due to both their structure and growth profile, affecting the profits of corporations.
As we mentioned in last Thursday's analysis, This strong increase in inflation can be explained by the different economic measures taken in the United States in order to deal with the pandemic, both by the Federal Reserve and by the programme approved by Joe Biden last March for an amount of $1.9 billion of direct aid through checks to American households. These policies, together with the advanced vaccination programme, have strongly pushed the American economy on the path of economic recovery, after the crisis caused by Covid-19.
Technically speaking, after setting highs last February, the NQ100 fell back to the important level of support and resistance reflected by the red band around 12,220 points from where a new upward momentum began that led it to set new all-time highs on April 16, after exceeding 14,000 for the first time. At that point, the price has formed a ceiling (in green) from where a correction began that led it to test 13,000 points after the sharp falls caused by the increase in instability in the financial markets.
At the moment, this latest bullish momentum is leading the price in search of its 18-session moving average, which currently acts as a resistance level. Consequently, it is very important to see if the price is able to overcome this level and surpass 14,000 points. The upward breach of the level would open the doors to an attempt to attack its all-time highs.
Source: Admiral Markets MetaTrader 5. NQ100 daily chart. Data range: from January 28, 2020 to May 17, 2021. Prepared on May 17, 2021 at 12:45 CET. Keep in mind that past returns do not guarantee future returns.
Evolution in the last 5 years:
- 2020: 43.64%
- 2019: 35.23%
- 2018: -3.88%
- 2017: 28.24%
- 2016: 7.50%
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