Bottom line: DAX long term structure continues to remain bearish until prices trade below 13800 mark. The counter trend rally might be into its last leg towards 11500/600 levels before the indice could find resistance again.
Fundamental Outlook:
DAX posted an impressive rally bouncing back from last week’s low at 10160 (gap opening) and closing around 11058 yesterday. The German Indice gained over +5.50% as Germany and France came up with a joint proposal for the EU recovery fund of EUR 500bn. The German and Euro zone Economic Sentiment Index to be out around 05:00 AM EST is expected to rise, which could further boost the above rally.
WTI Crude and Brent gained close to +8.0% yesterday to close at $32.20 and $35.45 per barrel respectively. It was their highest close since April 2020, backed by Global Equity markets. The SPX500 and Dow Jones also rallied to their highest levels since March 23, 2020 posting gains of over +3.0% each. News for near potential COVID-19 find by Moderna Inc. fueled the above rally, shrugging off US-China tensions at least for now.
Gold managed to open this week into the green again and rallied to fresh highs at $1765 before reversing lower. The Fed remains committed to do whatever it takes to support the economy and there could be more stimulus coming if required. Watch out for FOMC minutes to be out tomorrow for further tone and guidance.
Technical Analysis:
DAX continues to remain in control of bulls as the indice rallies past 11000 mark yesterday. By all means, this is just the last leg within the proposed counter trend rally, which began from 7950 levels in March 2020. It is projected to push towards 11500/600 mark before reversing lower again.
Intermediary support now stands around 10160 mark, last week’s low, and DAX needs to break below that to confirm that a meaningful low is in place. Also note that 11500/600 is marked by fibonacci 0.618 resistance, hence probability for a bearish reversal remains high. Expect intraday dip towards 10800/900 levels, before resuming towards 11500/
Most traders might be preparing to initiate fresh or add short positions around 11500/600, with protective stops above 12500/600 and projected targets below 7950 respectively.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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