Bottom line: DAX long term structure continues to remain bearish against 13800 resistance. The counter trend rally seems to be complete around 13300 levels and bears might remain poised to turn the indice lower again.
Fundamental Outlook:
DAX price action remained subdued yesterday as the indice manage to close at 12878, marginally higher. The indice along with its counterparts Dow Jones, SPX500 and NASDAQ seems to have carved a potential top last week around 13300 levels. Risk assets (Global Indices) had reversed last Friday.
The rising tensions between US-China, along with the COVID-19 pandemic would add further pressure to Global Indices. Another round of potential risk aversion amidst the US Dollar rally cannot be ruled out yet. The US Dollar Index might also be impacted by the ongoing negotiations over the next round of stimulus package.
Gold has continued its rally and hit fresh highs around $1981 levels before pulling back. The yellow metal has gained against the US Dollar selloff over the past few sessions. Investors might take a cautious approach as Gold remains vulnerable for a drop, around 09 year’s highs.
Technical Analysis:
DAX remain in control of bears until prices stay below 13800 resistance. The indice has further carved a meaningful lower high around 13300 mark recently as bears remain poised to push prices towards 8000 and beyond, over the next several weeks. Looking lower from here.
DAX had dropped in an impulse wave from 13800 through 7950 levels earlier. As discussed before, an impulse wave is usually followed by a corrective wave in the opposite direction. Since the 7950 lows, the indice has managed to produce a counter trend rally towards 13300 mark.
Also note that the counter trend rally had reached up to fibonacci 0.88 retracement of the earlier drop between 13800 and 7950 respectively. High probability remains for a swift bearish reversal towards 7950, going forward.
Traders might remain inclined to hold short positions from 13000 levels, with a protective stop above 13800 mark respectively. The projected target would be below 7950 levels and would take at least 12 weeks as bears prepare to accelerate below 12500 mark.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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