US Stock Markets: Trend Analysis for Next Week

11 February 2018

U.S. stock markets had an extremely volatile week previously and on Friday, it was  a stormy trading session in U.S. stocks, to say the least.

Dow Jones saw more than 300 points’ swing multiple times through the session and finally, the index closed positive for the day. What does this trading pattern signals for next week’s trading trend in Dow Jones and broader U.S. stock markets?

On technical charts, last session’s trading pattern is signaling a positive turnaround for Dow Jones and broader U.S. stock markets.

U.S. stock markets had been in a very strong native trend through the past week and on Thursday, major indexes fell below their 100 Day Moving Average, which pushed them in the correction zone. After that, only the 200 Day Moving Average could stop those index from falling into a bearish trend.

In the last session, major indexes came dangerously close to breaking that last support but then, a bounce back came in and U.S. stock indexes rallied back to close near their previous support (100 Day MA) and closed positive.

Dow Jones technical chart analysis

Positive signals emerge on Dow Jones chart

On technical charts, this trading pattern has created a “bottom hammer” candlestick, which is a positive trend reversal indicator in a falling markets. The RSI is also making double bottom in oversold region, which, inn normal circumstances, would have been a buying or positive signal.

However, we know that U.S. stock markets have been crashing on political worries; namely a power between President Trump and the FBI+ Department of Justice. There have been some resignation in the White House staff and in DoJ after the closing bell in U.S. stock markets on Friday. Controversies related to these departures are expected to continues next week. That may have an adverse effect on U.S. stock trading trend next week.

All major U.S. stock indexes closed near their 100 Day MA last week. That makes a broad trading range in these indexes with two  possible trending zones- an upper zone between 50 DMA to 100 DMA, and a lower zone between 100 DMA to 200 DMA. Friday’s lowest levels will be the major support for this trading range.

Going by these chart signals, U.S. stock markets will trade range bound early next week, within their Moving Averages, which will act as support or resistance levels.

U.S. stock markets will continue to trade with high volatility. That means, a rally will not stop these markets from a quick fall at any time of the session, and maybe multiple times within the same session.

If, by any chance, U.S. markets fall below the lowest mark of last week, then another wave of selling will hit these markets and global stocks.

How Global Stock Markets Will Trade Next week?

Global stock markets will see highly volatility in their opening session on Monday. Should they trade lower remembering the intraday -500 points drop in Dow Jones on Friday? Or, should they trade higher because Dow Jones closed with 300 points’ gains that day?

The trend in global stock markets may depend on how U.S. stock futures trade in the opening session on Monday. European stock markets had ignored the opening rally in U.S. stock markets on Friday, instead focusing on the overall strong downtrend in U.S. stocks.

With that trading pattern, European stock markets had closed with big losses in last week’s closing session. DAX (Germany) had come very close to fall below its strong range support of 12,000. If U.S. stock futures trade positive, then European stock futures may also try to bounce back from support levels, providing support to stock markets inn Asia.

However, if U.S. stock futures trade negative in opening hours of the Asian session, then we may see a negative start of the week in global stock markets.

Day traders can take advantage of such high volatility by changing  their day trading strategies with the short term trend. Buy when stock rally up and sell with the intraday downtrend.

How U.S. stock markets traded and closed in their last session: 

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