The first week of the year was mixed for the DAX. The S&P 500 was the same. Both indexes then shot up and have reached a level that could allow for a setback.

Therefore, the focus is now on the decision. Will prices break through the current resistance and continue the rally? Or will we see a setback and then have to reassess how to proceed?

S&P 500 in daily chart We have almost reached the 161.8 percent extension of the last downward stretch . Fibonacci was once again used to find a target zone. The high from January 12 was last seen at the 138.2 percent extension.

(Source: Tradingview.com) If the S&P 500 continues to follow these zones, it could reach the 261.8 percent extension at 5,423 points after an 11 percent increase . In a year where the US will elect a new president, this is conceivable.

But now comes the consolidation. After the strong rally, some air can now be released. The pressure from buyers was already enormous. Perhaps we have already seen the most significant decline yesterday. Or prices will fall even lower. We have plenty of room to the downside towards 4,800 points.

DAX in daily chart I showed you the marked zone the last time. As promised, the bulls have found their master here for the time being . There is still room to the downside here as well. The DAX doesn’t know my purple artwork and doesn’t have to turn back up at the lower end of the rectangle.

Because here we have a completely different taste than with the S&P 500. The DAX has been showing a whole series of lower lows in recent weeks! This trend has been going on since mid-December. After the DAX hit its all-time high once again, it now has to prove that this pattern is over.

(Source: Tradingview.com) If that doesn’t work, we could indeed see prices of 16,300 points again soon. However, this is contradicted by the fact that the DAX is also making lower highs with the lower lows. It ended this a week ago.

The chance of a setback still exists, of course. It just doesn’t have to reach a new low. We can also just fall into the range around 16,750 points and then rise again.

Conclusion DAX and S&P 500 have to decide whether the rally can continue directly. Otherwise, the chance of a setback increases. From the current perspective, the DAX has more downward potential. Whether the bears will take advantage of this, we will see next week.