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Is today’s DAX rally just a dead cat bounce?


DAX Xetra (cash index)

The huge sell-off has broken below the support of 11,009 to take the DAX to a two year low, how the bulls react will be key.

Unless they drive the market quickly higher, the writing could be on the wall for further weakness.

The trouble is that at the moment, today’s move looks to be simply a dead cat bounce.

With longer term technicals now confirmed as being very negatively configured, the run of lower highs and lower lows suggests that any prospective rebound will struggle for traction.

After a 3% decline yesterday, a rebound of around a percent today is little more than a damp squib for the bulls so far.

  • The old support around 11,000 is now a basis of resistance, but any rally that begins to fail in the 11,000/11,200 band will be seen as another chance to sell.

Medium term momentum is negative but also has downside potential and it is interesting to see this morning that the rebound has had little real traction so far.

Perhaps this is a case of waiting for payrolls later but the outlook now looks rather precarious for the bulls.

  • There is little to suggest that pressure on 10,800 as an old support is likely to continue, whilst yesterday’s low at 10,762 is initial support.

 


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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.