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Indices mixed as US earnings season draws to a close

Technical outlook on the FTSE 100, DAX 40 and S&P 500 amid record Eurozone inflation and the start of the Fed’s balance sheet reduction.

​FTSE 100 still flirting with its early May high

The FTSE 100 continues to flirt with its early May high at 7,621 and targets the late April high at 7,657, as traders continue to speculate on how aggressive monetary tightening will need to be to lower global inflation and as China’s metropole Shanghai reopens after two months of lockdown ahead of the UK Queen’s Jubilee weekend which begins tomorrow.

An advance and daily chart close above the 7,657 21 April high would engage resistance between the 7,657 to 7,690 January 2020, February, and April 2021 highs which is expected to thwart the first attempt of a breakthrough. Above the 7,690 January 2020 peak lies the July 2019 high at 7,730.

Minor support below yesterday’s low at 7,572 comes in at the 7,545 mid-May high.

DAX 40 consolidates after Eurozone inflation hits record 8.1%

The recovery rally in the DAX 40 has taken a breather at 14,607 as investors digest yesterday’s Eurozone inflation data which has hit its highest level since the creation of the Euro at 8.1% in the year to May, piling pressure on the European Central Bank (ECB) to hike its rates and move away from its ultra-loose monetary policy.

A minor retracement back towards previous resistance, because of inverse polarity now support, at the early and mid-May highs at 14,315 to 14,282 may thus ensue.

Further down meanders the 55-day simple moving average (SMA) at 14,162 and the one-month support line at 14,140, both of which may also act as support, if reached at all that is.

A rise above this week’s high at 14,607 would open the way for major resistance at 14,840 to 14,927 to be reached. It consists of a previous key support area, made up of the May 2021 to February 2022 lows, before being slipped through when, due to inverse polarity, it changed to a major resistance zone.

Just like in late March, when it triggered the sell-off to the May trough, the 14,840 to 14,927 resistance zone is expected to once again cap when first revisited. Above it the 200-day SMA can be seen at 15,082.

S&P 500 tests support zone as first quarter earnings season draws to a close

The S&P 500’s swift recovery rally from its May low at 3,811 has so far taken it to this week’s high at 4,203 on the Daily Financial Bet (DFB), while the US cash market was shut for Memorial Day on Monday, before retracing lower as the first quarter earnings season draws to a close.

The index has so far slid back to but held at the 4,142 to 4,097 support area as market participants await US manufacturing and construction spending data for May on Wednesday, which also marks the start of the US Federal Reserve’s (Fed) balance sheet reduction.

The 4,142 to 4,097 support zone contains the February-to-March lows and the mid-May high. As such it is likely to again hold the downside today, just like yesterday. If not, a slip to the 2 May low at 4,062 may unfold.

Provided that the mid-May high at 4,097 acts as support on a daily chart closing basis, the last few days' uptrend should remain intact with the 55-day SMA and early May high at 4,274 to 4,308 remaining in focus.

This resistance area needs to be exceeded for a medium-term bullish trend reversal to gain traction and for the 200-day SMA at 4,455 to eventually be reached.

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