Dow Jones, Nasdaq 100, DAX 30, FTSE 100 Forecasts for the Week Ahead

Dow Jones, Nasdaq 100, DAX 30, FTSE 100 Forecasts: Bearish

Dow Jones Forecast

Outlook: Bearish

US indices entered the weekend on the backfoot as investors await the upcoming Federal Open Market Committee rate decision in the week ahead. While no change to the interest rate range is expected, minor tweaks to the bond-buying, balance sheet expansion and maturity of held securities may become the focus of the market’s attention instead. The Federal Reserve’s monetary policy operations have become increasingly vast in the wake of coronavirus which has added another layer of complexity to the monetary policy adjustments.

The increased operations have also resulted in a rapidly expanding balance sheet, one that remains a key tailwind behind US equities. As other fundamental forces have come and gone, the Fed’s accommodation has remained and is likely a large part of the stellar performance the Dow Jones, Nasdaq 100 and S&P 500 have enjoyed this year. Thus, any perceived pullback in the Fed’s willingness to buoy the economy could seriously undermine the three indices.

Dow Jones Price Chart: 4 – Hour Time Frame (September 2020 – December 2020)

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Nasdaq 100 Forecast

Outlook: Bearish

The Nasdaq 100 suffered a modest decline last week despite a white-hot IPO market that has seen remarkable gains in recently-launched technology stocks. AirBnB was the most recent addition to the market and quickly doubled from its opening price. Valued beneath $20 billion in March, the company briefly enjoyed a valuation greater than $100 billion – an alarming increase amidst a global pandemic.

Nasdaq 100 Price Chart: 4 – Hour Time Frame (August 2020 – December 2020)

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While great for AirBnB shareholders, the recent propensity for stocks to soar after their initial public offering could hint at exuberance in the market. Similarly, other stocks like Tesla continue to trade at staggering valuations relative to their profits which further suggests some irrationality may be present in the market. Despite the warnings, stocks have continued higher for months and while they may be susceptible to shorter-term pullbacks, the longer-term trend remains higher.In the meantime, follow @PeterHanksFXon Twitter for updates and analysis.

DAX 30 Forecast

Outlook: Bearish

The DAX 30 is headed into a relatively quiet week in terms of event risk and it may merely follow price action experienced in the Dow Jones, Nasdaq 100 and even FTSE 100. That being said, the technical landscape might hold insightful cluesfor price action in the week ahead.