Risk-on sentiment is back in play, pushing indices higher
Bullish technical outlook on FTSE 100, DAX 40 and Dow, now that bullish reversals signals have been triggered.
FTSE 100 tries to overcome its early May high
The FTSE 100 is trying to overcome its early May high at 7,621 and reach the late April high at 7,657 amid global risk-on sentiment due to hopes that the US Federal Reserve (Fed) may not need to tighten as much as previously feared following a further slowdown in core US PCE inflation and as China’s reopening plans spurred a rally.
A rise and daily chart close above the 7,657 21 April high would engage resistance seen between the 7,657 to 7,690 January 2020, February, and April 2021 highs which is expected to thwart the first attempt of a breakthrough during a curtailed week as the UK celebrates the Queen’s Platinum Jubilee with a long Bank Holiday weekend which begins on Thursday.
Above the 7,690 January 2020 peak lies the July 2019 high at 7,730.
Minor support is seen at the 7,545 mid-May high.
DAX 40 trades near two-month highs
The recovery rally in the DAX 40 has taken it to levels last seen in early April, to above the 14,599 21 April high, in low volume, risk-on trading as many Europeans made a long weekend out of Thursday’s Ascension Day holiday.
The major 14,840 to 14,927 resistance zone is thus back in focus. It began as a key support area, made up of the May 2021 to February 2022 lows, before being slipped through when, due to inverse polarity, it changed to a major resistance zone and thwarted the steep March rally which provoked the sell-off to the May trough.
From there the current rally seems to be taking the DAX 40 back towards the 14,840 to 14,927 key resistance zone which is expected to cap when first tested.
Above it the 200-day simple moving average (SMA) can be seen at 15,096. Good support can now be found at previous resistance, namely between the early and mid-May highs at 14,315 to 14,282.
Dow finished the week on a positive note after a five-week slump
The Dow Jones Industrial Average’s recovery rally from its current May low at 30,637 low has taken it to above its two-month downtrend line and, more importantly, its mid-May high at 32,756 on Friday, thus leading to the first bullish week after five consecutive weeks of lower levels being seen.
The rally came amid risk-on sentiment as investors hope that the Fed may not need to tighten as aggressively as had previously been feared and on the back of a further slowdown in core US PCE inflation.
With today’s US cash markets being shut in the US due to Memorial Day, the index is looking for further gains on its electronic overnight session with the 55-day SMA at 33,624 being in focus, now that a bullish reversal has been formed after a bottoming formation.
Key resistance is made up of the 34,181 to 34,059 area which consists of the late February and early March as well as the early May highs. Support is now seen at the 32,756 mid-May high.
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