DAX Xetra (cash index)
A corrective candle has questioned the strength of the bulls as the market slips back within the recent uptrend of recovery and an important crossroads is neared.
The move to close the bullish gap higher from Friday’s session now puts added pressure on how the bulls will respond today.
The concern is that if there is another negative candle today the momentum could start to build on a correction.
Momentum is falling over where previous rallies within the medium term downtrend have failed.
The RSI has again fallen over at 60, whilst the Stochastics are threatening a bear cross.
That makes the reaction in the next few sessions crucial to the near term outlook.
A run of bear candles with a breach of the downtrend would usher another sell signal on the Stochastics (similar to the failure of the late August rally).
Initially the reaction today has been to buy intraday weakness, which is encouraging, but essentially a close back above 12,400 would be needed to re-engage the bulls.
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