Dow Jones, DAX 30, FTSE 100 Forecasts: Neutral
Dow Jones Forecast
Stocks soared early last week on news that an effective coronavirus vaccine was in the pipeline for development. The news helped lift sectors of the market that had been beaten down during the earlier stages of the pandemic, namely airlines, energy and industrials. As the “Industrial Average,” the outsized move in some of these sectors helped propel the index higher than that of the tech-heavy Nasdaq 100. Evidently, the rotation from hot technology stocks to industrials and other sectors is in full swing.
Dow Jones Price Chart: 4 – Hour Time Frame (September 2020 – November 2020)
That being said, any benefits – beyond the initial price reaction in some stocks – from the vaccine are still a ways off. Thus, the recent strength in some of these beleaguered sectors, could be too much too soon relative to the changes on the ground. While the market is forward looking, it is not impervious to shorter-term hiccups so the sectoral rotation witnessed last week might slow in the weeks ahead.
Further still, coronavirus cases continue to spike across the western world and this may continue to erode measures of economic activity. The rise in positivity rates should serve as a headwind to each of the indices highlighted in this article and risk-sensitive assets more broadly.
DAX 30 Forecast
Like the Dow Jones, the DAX 30 has been a beneficiary of vaccine news despite ongoing lockdowns across Germany and the rest of Europe. With a sparsely populated economic calendar in the week ahead, the DAX 30 will likely juggle the same themes as last week – with the added bonus of reduced uncertainty around the US election. Critically, however, the DAX 30 does not share Nasdaq-like levels of exposure to technology, so if the rotation from work-from-home stocks to industrials slows, the index might begin to lag its US counterparts once again.
DAX 30 Price Chart: 4 – Hour Time Frame (July 2020 – November 2020)
Regardless, it seems the DAX 30 is destined to follow in the footsteps of either the Dow Jones or Nasdaq 100 in the week ahead with technical levels offering their influence on the shorter-term timeframes. In the meantime, follow @PeterHanksFXon Twitter for updates and analysis.
FTSE 100 Forecast
Much of the same can be said for the standing of the FTSE 100. UK Prime Minister Boris Johnson has issued another round of measures in an attempt to curb coronavirus and these procedures should work to erode economic activity while they are in place. As a result, the pace of the economic recovery might slow and the FTSE 100 could face headwinds as a consequence.
FTSE 100 Price Chart: 4 – Hour Time Frame (June 2020 – November 2020)
–Written by Peter Hanks, Strategist for DailyFX.com