SP500, DAX40 and FTSE100 price forecasts

[MongiIG]

SP500 is correcting from overbought territory, while the DAX40 and FTSE100 test support.

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 06 July 2023 

SP500 (US500) - overbought and negative divergence signals within uptrend

Source: IG

The SP500 Index, while remaining in a long-term uptrend, has given some further indications that a short-term correction may be underway.

The long-term uptrend is gauged by the price still trading firmly above the 200-day simple moving average (200MA) (blue line).
The bearish price reversal around the high at 4450 is accompanied by an overbought signal and a bearish divergence signal with the stochastic oscillator. The low at 4330 provides an initial support target from the move lower.

Trend followers might prefer to wait for weakness to play out before looking for long entry on a bullish price reversal at one of the labelled support levels on the chart above.

DAX40 (Germany 40) - testing range support

 

Source; IG

The long-term trend for the DAX40 remains up, while the short to medium term trend for the index is considered sideways. The price is currently testing support of sideways range at 15715.

Traders looking for long entry might prefer to see a price reversal off this level before looking for long entry and targeting a move back towards range resistance at the 16330.

Should the current support level (15715) not hold and instead a downside breakout confirm (with a price close below), 15485 becomes the next support target from the move. Traders still respecting the longer-term trend bias might then prefer to look for long entry on a bullish reversal before this level.

Only on a price move below the 200MA (blue line), would we reassess the long-term upward trend bias considered on the index. A move below the 200MA would instead change the assumed bias from up to sideways longer term.

FTSE100 - breaking support

 

Source: IG

The FTSE100 index, after finding resistance at the 7560 level, has moved to and through support at the 7410 level. A close below this level would consider 7285 as the next support target from the move.

Currently the long-term trend for the Index is considered sideways as we see the price whipsawing through the 200MA (blue line). Range traders might hope to see a bullish price reversal off this level for long entry before targeting a move back towards the 7560-resistance level.

If the 7285 level is broken with a close well below, a new longer-term downtrend for the index might then be considered.