Bottom line: DAX long term structure continues to remain bearish against 13800 resistance. The indice has further carved a lower high at 13300 levels and bears would be poised to keep prices below that. A break below 12250 would accelerate lower.
Fundamental Outlook:
DAX had remained almost flat yesterday closing around 12687 mark. DAX futures trading higher today around 12830, as we prepare to publish. DAX might come under pressure again amidst rising COVID-19 infections in many European Countries including Germany, France and Belgium.
Global Equity markets continue to remain fragile as US-China tensions continue to rise with each passing day. China announced yesterday that it would sanction select American Officials in retaliation to the US sanctions over the last week. Investor sentiment might quickly reverse, triggering a massive risk aversion, if there is no clarity on further stimulus package over extending unemployment benefits.
Gold prices hit fresh highs at $2075 last week before pulling back. The yellow metal has been under pressure with potential profit bookings seen, as it trades around $2000 mark for now. WTI Crude trades just over the $42.00 mark and might come under further selling pressure over COVID-19 fears.
Technical Analysis:
DAX is looking to retrace its recent drop between 13300 and 12250 respectively. The indice might face resistance around 12800/900 levels and is expected to turn lower thereafter. Bears are looking poised to be back in control and push towards 8000 levels in the next several weeks.
DAX had dropped from 13800 through 8200 levels as an impulse wave. Ideally, an impulse is followed by a corrective wave in the opposite direction. The indice has produced a counter trend rally towards 13300 levels and should be preparing to resume lower.
The counter trend rally had reached up to fibonacci 0.88 levels around 13300 mark before finding resistance. Furthermore, the drop between 13300 through 12250 also looks to be an impulse, which is being retraced by a corrective wave towards 12800/900 levels respectively.
Most traders might remain inclined to initiate fresh short positions on a bearish reversal from 12800/900 levels. The protective stops would ideally go above 13300 mark while projected targets would point below 8000 levels.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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