For technical weekly chart check post: https://www.tecet.net/?p=1299
What we can except next weeks? Bellow events which can drive market right now.
Not easy job at all, market controlled by short sellers for 10 months all ready. DAX and EU general still struggle to fix situation after January price shock while US Indexes not only level losses but score new highs. However we are starting last quarter of year which is strongest for German Index so soon we can look after solid buy setups?
Beside strongest data buyers will need bullish chain of news to pull that out. Bellow some examples :
- Bavarian elections investors don’t like changes of political power so closer to current balance more bullish for market, market can be worried as power shifting from Christian-democratic conservative CSU to the right-wing nationalist AfD party (14 Oct)
- UK – EU brexit deal, lack of outcome torturing investors way too long, we see as market just cant wait for positive closure, any good news even rumors creating hype rally’s in UK/EU stocks and currencies (18/19 Oct)
- US – China deal, long story short. Huge impact on appetite to risk take, only US indexes hold that strong, but most likely rig market and supported just to create impression as US won. Current sell off and yelds spike can a bit pressure US government to look for more compromising position. (watch for any media news / rumors in next week/2 or before/just after November Mid-trems)
- Italy budget problems, current proposition of 2.4 deficit was against guidelines of EU commission, attempt to push that further trigger sell off in Italy and EU Indexes and create big gap in bonds spread between Italy and other EU countries, in results Italy government change tone a bit which calm down markets. Soon we will see final budget proposal. (15 Oct)
- Emerging markets weakens, we saw how badly Turkey get hit by weak monetary policy and how unprepared was to that stress test, Turkey is very closely correlated to Germany economy thanks to large Turkish minority living there. Improving situation can help both.
- ECB interest rates, Stocks enjoyed long bull run after 2008 financial crisis, cheap money, leveraged positions drive markets to highs. Extending current policy will give 2nd breath for EU stocks, weaken Euro creating opportunity for investors from outside EU to buy cheap. It is long way to go but market tend bet and price such movements earlier. (13 Dec)
Upper hand 10 months all ready, so much easier job to do, cap buyers attempts to break out or exploit that to create bearish rally for even better pump and dump scenarios. Bears know as best way to make money on short sell is fake rally to lure and trap bulls on top and break them completely with push under key resistance and long term lows (12730/500 and 10k)
- Bavarian elections – right wing strength can be not much welcome and supported by market and institutions can adjust risk towards Germany
- UK/EU no deal futher sell off both Stocks and Pound / Euro
- US / China trade wars escalate, markets all ready on edge becouse of that.
- Italy ignoring EU guidelines or EU skeptics show off will force institutions to further adjust risk towards Italy economy what will impact all EU generally
- ECB interest rates, US / UK all ready increasing interest rates and market is ready for ECB to follows, we have risky global situation and with low interest rates ECB lack of tool to help economy if situation turn worst. Increase rates can encourage institutional investors to move money out from stock market towards less risky instruments which they general favor.
2nd part of October will give answers for most pointed above situations. That mean all ready now we can see market preparing to this events.
Beside news driven action we will be watching further development in US bonds markets 10/30y notes as is most recent market mover.
Check below Nomura Risk Radar, clearly big chain of events in so narrow space of time
Guys hopefully this brief summary of near term events can help you take better trading decisions and limit risk. Be ready for volatility pick up to quite high levels, choppy action, crazy rallies and dumps.
Good luck and trade safe!