Bottom line: DAX long term structure continues to remain bearish against 13800 levels. The indice has managed to hold prices below its recent swing highs at 12900 levels. Bears might be looking to resume lower towards 8000 from here.
Fundamental Outlook:
DAX opened gap up yesterday and managed to close higher by +1.6%, closing at 12733 mark. The indice was backed by Asian Markets, Nikkei closed the day up +1.8% and Nifty +1.47% respectively. The US Markets were no different as Dow Jones and SPX500 managed to close higher by almost +2.0%.
COVID-19 infections have crossed over 11.7 million mark and deaths over 540,000 globally. Lately, United States and India (over 700,000 now) are witnessing a steep rise in infections and many states have re-imposed lock down.
Global Markets have continued to defy and ignore most economic conditions discussed earlier, as they continue their rallies. Since March 2020 lows, indices have recovered almost all loses as investor psychology remain optimistic.
The fiscal stimulus offered by Central Banks could be the only reason behind this relentless buying of stocks. We want to remind of a similar situation in February 2020 and that too much of optimism might be a warning signal of a potential turn.
WTI Crude has again faced selling pressure around the $41.00 mark yesterday. The commodity trades below $40.50 as we prepare to publish and could slip further towards $32.00/33.00 per barrel.
Technical Analysis:
DAX interim resistance at 12900, print on June 08, 2020 remains intact as the indice carves a lower high around 12840 yesterday. It was critical for bears to hold below 12900 to keep the above structure intact and remain in control. A break below 1275 confirms a top in place.
DAX had dropped from 13800 through 8200 as an impulse wave earlier. An impulse is usually followed by a corrective wave (3 waves). The rally between 8250 and 12900 was a corrective wave, which managed to reach fibonacci 0.786 retracement of the earlier drop.
Most traders might have initiated fresh short positions around 12800/900 mark, with a protective stop above 13800 and potential targets below 8000, going forward. Only a sustained break above 13000 would change the above bearish structure.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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