Bottom line: DAX bearish structure remains intact until prices stay below 13800 resistance. The indice might have tested major hurdle around 12900 mark yesterday, before reversing lower. A break below 12300 would confirm a meaningful top is in place.
Fundamental Outlook:
DAX continued its rally yesterday closing it at 12922 (futures), the highest since February 24, 2020. The German Index rose over +1.2%, along with SPX500 (+1.2%) and Dow Jones (+1.75%). The 13 week rally has been defying the Economic Damage caused by COVID-19 pandemic and investors are now beginning to believe that the worst is behind.
Markets will now look forward to the Fed meeting to be held tomorrow. R=Interest rates are set to remain on the lower side 0.25% and much of that is already priced in. Having said that, we would warn here to be over optimistic on the hopes of a V-Shaped economic recovery globally.
Gold had drop on Friday to $1671 after the NFP was released. It came in as a surprise as the US adder over 2.5 million jobs in May against the projected loss of over around 8 million. It remains to be seen how Gold prices react to the Fed meet tomorrow as the yellow metals remains vulnerable to break below $1660.
Technical Analysis:
DAX continues to remain in control of bulls as they manage to pierce above 12900 mark yesterday. Most traders are surprised looking at the extent of the corrective rally that had begun from 7950 levels in March 2020. Technically, the rally is just an extension to complete the corrective phase and DAX should resume lower any time soon.
DAX has managed to carve a Hanging Man candlestick pattern on the Daily Chart, which could be a potential turning point against 13800 resistance. We still need to see a break below 12300 interim support, before it can be confirmed that a meaningful top is in place around 12900 mark.
DAX had earlier dropped from 13800 through 7950 levels, in an impulse wave. Subsequently, it has produced a corrective wave towards 12900 levels. High probability remains for another impulse wave lower, as long as 13800 remains intact. Traders might be preparing to sell further around 12800/900 levels, with a protective stop above 13800 mark and projected targets below 7950 levels respectively.
Prepared by
Harsh Japee, Technical Analyst.
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