What’s inside:
- DAX turns down from formidable resistance around 12300
- Still in the confines of a ‘head-and-shoulders’ formation
- Global risk appetite and elevated euro could simultaneously weigh on the index
Find out in the Q3 Forecast what’s driving the DAX and Euro.
When we discussed the DAX on Tuesday, the feeling was ‘buyer beware’ as the index remains stuck in the grips of an ongoing ‘head-and-shoulders’ top and maybe even more importantly below very strong resistance. Yesterday and the day before the market tested the area around 12300 which up to about 12340 has been problematic since the end of last month. In confluence with this key area of resistance is the trend-line off the June high.
Yesterday’s rejection bar could be all we see for the DAX on the top-side as a resumption towards lower prices gets underway. Other markets – namely the U.S. – had their chance to make a move on record highs (again), but instead the S&P 500 has a lower high, lower low sequence developing. ‘Risk-off’ looks like it is getting closer and closer to becoming pervasive. The DAX could have a couple of factors working against it soon, a weak global environment for equities and an elevated euro.
Looking at the German index from a pure technical standpoint, in a bubble, the trend off the June highs after breaking the neckline of the H&S topping formation continues to point towards more weakness. And, as long as it stays below the area surrounding 12300 sellers will continue to be in control. Looking lower, support arrives in the 11950/40 vicinity where the 200-day MA and 8/11 swing-low arrive. After that, 11850, then the measured move target of approximately 11600. The ‘MM’ target isn’t an actual support level but based on the size of the ‘head-and-shoulders’ top (height subtracted from the neckline).
DAX: Daily
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---Written by Paul Robinson, Market Analyst
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