Outlook for US and European stock markets
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.
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.
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.
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.
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.
Technical Analyst & Trader
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