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Where S&P 500, Dow Jones And DAX Stand After Bouncing From 38.2% Fibonacci Level

ByAlpari Research & Analysis
AuthorTomasz Wisniewski
Published 04/01/2020, 05:29 AM
Updated 05/14/2017, 06:45 AM

Following last night’s overall improvement in prices on a technical basis, our focus today will be on indices. Major indices in the US and Germany managed to bounce from the 38.2% Fibonacci level which is currently considered a crucial resistance level and a major level in the corona-crash rebound.

Let’s start with the Dow Jones which managed to create the head and shoulders pattern after breaking the lower line of the wedge – remember this pattern is considered a bearish indicator. The price has already broken the neckline, which indicates that the sell signal is probably already active. Necklines like to be tested as resistances soon after a breakout, so watch out for a temporary bullish bounce.

The S&P 500 is in more or less the same situation. The details will determine whether the latest price movements are forming a head and shoulders pattern or a double top formation, and this can be interpreted either way by you. The neckline was also broken and the sell signal is also active. The negative sentiment will remain as long as the price stays below the significant 38,2% Fibonacci retracement level.

The DAX is holding up a bit better than its U.S. competitors. Optimists will probably interpret the sideways trend as a consolidation. I see it as a head and shoulders pattern which has not broken the neckline yet. As long as the price stays above 9400, buyers can still hold on to hope. However, it’s hard to imagine that Germans will manage to keep the price up while markets on the other side of the pond continue falling.

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