Technical forecast for US and Euro Stock markets

FTSE future did pull back on profit taking as we warned, breaking 6126 to reach our target of 6110/05 where we predicted a low for the day. The low was made exactly here at 6107. We then raced higher breaking the previous high of 6153 as we reach for our next target of 6177/85. We have so far fallen just a little short at 6172 but if we break higher later in the day look for 6232/37 as our next target.
If we fail to beat the 6177/85 resistance and see some profit taking this would see us test support at 6140 and then 6120 to cover any shorts. Below here risks another test of yesterday’s low in the 6110/05 area. We should exit any remaining shorts here and look to buy in to longs down to 6088 with a bounce then expected, possibly a low for the week. Stops on longs needed below 6073.

Dax futures fell to the 7640/32 support area where we suggested exiting any shorts and trying longs and this worked perfectly as we bottomed at 7633. We have been stuck in a 90 point range since the start of the month but we have unwound overbought indicators and could be ready now for a break higher.

Immediate resistance at 7721/24 but we could open above here to test yesterday’s high at 7750. A break above 7769 should then allow a test of 7795/7805 highs and tough resistance today. Exit any longs and try shorts with a stop and reverse in to longs again above 7815 for 7826 and above here a run to 7896/7906 to take profit on those longs.

Failure to get through 7724/21 could take us to 7701 and if we continue lower look for 7676/70. Below 7660 we could retest that 7640/32 support area for exiting any shorts. Try longs again with a stop below 7620 for a test of good support at 7603/7593 and an excellent buying opportunity.

Eurostoxx has spent the last 14 trading sessions stuck in a range from 2675/81 up to 2728/29. Although over bought the market refuses to break lower and is going sideways while the indicators unwind. Selling in to shorts in the 2726/29 area has been working well in the last few days but the risk of a break higher is now increasing. We use a tight stop above 2737 as a break keeps the 7 month bull run alive looking for 2756 then 2763/66 for some profit taking.

Support at 2700/02 and below here could see us back at 2681. Again a good chance of a low here today with the risk we hold in a range but longs need a stop below 2675 for 2666 then possibly 2656/51. This is strong support so should offer an excellent buying opportunity. Stops needed below 2640.

S&P sold off to 1475 which we expected could hold any weakness and this did in fact mark the low for the day. We then broke 1484 and finally hit our target of 1489 over running slightly to 1491. This market is severely over bought but it seems no one cares and it is unwise to fight the trend.

We are back below 1489 resistance now with small trend line support at 1487 but below 1484 we could see 1480/79. Below here we could test good support at yesterday’s low of 1475/74. Exit any shorts and buy in to longs with a stop below 1471 as this should lead to an excellent buying opportunity at 1467/66. We expect a bounce but will activate stops below 1460.

Above 1491 keeps the 6 month bull running on towards 1503 for profit taking. A push through here then targets 1511 next. If we continue higher next week look for 1527/20 on the way to 1527.

Dow Jones Industrial Average Future sold off in the morning towards 13529/523 which we predicted could provide a floor. The low was in fact 13531, almost exactly at our support. We then raced higher breaking 13600/614 which we expected would signal a challenge of the 2012 high at 13717. We hit this target and topped out.

So what next? The market is severely over bought. 13717 is major resistance being a yearly high of course and we have failed to close above it. Therefore there is a high risk of a bearish double top formation. It is too risky to be long now and shorts can have a tight stop above 13730 so this looks like a risk worth taking as there is significant profit potential to the downside with 13487 a realistic target in the weeks to come. More immediate support seen at 13648 then 13605/603 which could mark the low for today. Any longs here need a stop below 13570 for 13535/30. Very doubtful we fall any further at this stage.

We have to be ready to stop out of shorts and buy in to longs on a break above 13730 as this targets 13799.

Jason Sen began his career in the options pits on the trading floor of LIFFE in 1987 at the age of 19, making markets on his own account. In 2001 when the trading floor closed he successfully made the transition to day trading on computer screens. Jason always had an interest in technical analysis throughout his trading career but began to study this area in depth from 2006. www.daytradeideas.com has established itself as the leading provider of... More