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DAX shows corrective signs as crossroads nears


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.

  • Support from a two week uptrend comes in at 12,270 today and this move could still just be a minor retracement, but there is a worry that the larger bear trend of the past three months could be at play here.

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.

  • The hourly chart shows initial support at 12,300 and a breach could mean a retreat to 12,130/12,185.
  • A move above 12,400 would help to improve the outlook again which on the hourly chart show halt a run of lower highs too.
  • Key near term resistance is at Friday’s high of 12,458.

 


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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.