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Outlook for US and European stock markets

Jason Sen

The E-mini Dow Jones has suffered its biggest one-day fall since February as we collapsed over 1000 points. The December contract collapsed to the 100-day moving average at 25440/430 and overran to 25188, just above 200-day moving average support at 25140/120.

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This support is hugely important today. Try long positions with stops below the August low at 24960. A break below the much-less-important five-month trendline at 24930 is a sell signal targeting 24810/800. On further losses look for 24690/680 and 24610/600.

There is a very good chance we will hold the 200-day moving average support at 25140/120, targeting 25350/370 and the 100-day moving average at 25420/440. We should struggle here but if we eventually continue higher look for further resistance at 25520/540.

The E-mini S&P 500 took its biggest one-day loss since February as we collapsed over 100 points to 2750 this morning as I write. The December contract meets important 200-day moving average support at 2768/66 as we become oversold in the short term and start to enter oversold conditions on the daily chart.

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A recovery above 2770 would be a good start for bulls, allowing a recovery to 2785 before resistance at 2795/97. We should struggle here with a high for the day very possible. A move above 2805, however, can target strong resistance in the 2920/25 area. Holding here keeps the market in a short-term bear trend.

Long positions at 2768/66 need wide stops in this volatile environment, preferably below 2750. A break lower then targets 2742/41, 2738/37, 2733, 2730/29, 2724 and 2721/20. On further losses look for 2713/11 and strong support at 2702/00.

Focus on Europe

The DAX 30 collapsed from 11983 to bottom exactly at 11890/880 in the morning session. Then in the afternoon we broke the September low at 11860 and three-month trendline support at 11770/760. We are now trading below the March low at 11707.

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DAX December futures bottomed at 11605 on Wednesday. A recovery targets 11690/699 then strong resistance at 11760/780. A move above 11810 takes us to resistance at 11880/890. Short positions need stops above 11920. On further gains look for 11970/980 with a selling opportunity at 12050/070.

Just below 11600 we meet the important 14-month trendline (and neckline to the head and shoulders) support at 11560/540. This is absolutely key to direction into the end of the week. Long positions need stops below the 200-week moving average at 11420/400.

A weekly close below here on Friday would be a serious sell signal. We could quickly target 11250/230 and 11150/140 as stops are triggered, but further significant losses would be expected into next week and the end of October.

The Euro Stoxx 50 reversed from 3315/18 and unexpectedly collapsed in the afternoon to 3228. For Euro Stoxx December futures, the key to direction this morning is first resistance at 3270/80. Holding here re-tests the low at 3238/28.

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A break lower targets 3205/00 and the important low for 2018 at 3182/72. Obviously a break below here is an important sell signal, but we need a weekly close below tomorrow night for confirmation.

A move above 3290 would allow a further recovery to 3310/20. On further gains look for 3335 and strong resistance at 3360/70. Short positions need stops above 3390.

Jason Sen

Technical Analyst & Trader

For more information and trading education visit InterTrader

The content of this article is the personal opinion of the author and not InterTrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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