Bottom line: DAX long term structure continues to remain bearish against 13800 levels. The indice has also managed to carve a lower high at 13500 mark and ideally prices should stay lower. Bears might be preparing to resume lower towards 11600 and beyond over the next few trading sessions.
Fundamental Outlook:
DAX has started the week on a positive note, rising over +1.38% yesterday. The indice managed to close around 12880 levels in line with most global equity markets. Dow Jones closed higher by +1.68%, while SPX500 and NASDAQ gained +1.8% and +1.91% respectively. The US Dollar Index was marginally weak (-0.38%) closing around 93.45, as risk assets soared.
Technical Analysis:
DAX seems to be preparing to turn lower again as prices stall just below 13000 mark. The indice had managed to carve a lower high around 13500 levels early September and has managed to hold. Bears remain poised to turn lower from here and push through 11600 support over the near term.
DAX had earlier dropped from 13800 through 7950 levels unfolding as an impulse wave. Ideally, an impulse would be followed by a corrective wave in the opposite direction. The indice had managed to produce a counter trend rally from 7950 through 13500 mark respectively.
Also note that the counter trend line has been broken and the indice is now trading into the sell zone keeping bears in control. Until the above resistance at 13500 and subsequently 13800 remains intact, DAX is expected to remain in control of bears and continue pushing lower.
Furthermore, the indice might unfold as another impulse wave towards 7950 levels in the next several weeks, to complete the wave structure. Most traders might be preparing to hold short positions initiated around 13500 resistance with protective stops above 13800 and target below 8000 levels respectively.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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