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Dax Daily Market Forecast
Dax Technical Analysis
15th June 2015
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Where Next For Stocks?
By Jason Sen
You can see in the monthly chart below how the Emini Dow Jones collapsed as far as the 23.6% Fibonacci support at 15,532. In fact we overshot as far as 15,285 on Monday but an incredibly swift recovery has seen the market settle so far this week above that important Fibonacci support area. In fact we have not seen a daily close so far below 15,700. You can see how important that 15,500 area is, when you look at the peaks of 2013 and the troughs of 2014. Although we saw small spikes above this area in 2013, we did not manage a monthly close above it. At the beginning of 2014 you can see how the monthly closing prices were above 15,500. This is clearly going to be a very important level going forward therefore and as long as we hold above this important support level we have a good chance of a recovery in September. The other important level to note is that long Bull trend line going from the bottom of the 2008 financial crisis crash. This downturn bottomed in March 2009 and you can see drawn a bull trendline joining the low in 2011. We are hovering just below that trendline which is at around the 16,150/170 area. This is the main challenge for Bulls to overcome now if we are to stage a recovery. Let’s zoom into the weekly chart , which shows the 200 week moving average represented by the red line. ‘Black Monday’, as I believe it is now being referred to, bottomed out at 15,285 and this was about 40 points only above the 200 week moving average support level. The trendline that I have drawn joining the lows of 2014, happens to be around the area where the market gapped lower on Monday morning. This value is around 16,400, so this will be the next barrier to a recovery , but if we conclude this hurdle we can push on towards the 100 week moving average at 16,950. This coincides with the previous low for 2015, which was seen in February at 16,962, so obviously this area will be quite a challenge. There is a strong chance in fact any recovery will fail here and that would indicate the start of the longer-term bear trend. In fact the daily chart was already giving important warning signs of the start of a longer term bear trend with moving average crossovers, as you can see in the chart below. The most important crossover here is the blue 100 day moving average, just now touching the red 200 day moving average line. The fact that they are both just starting to turn lower is significant as a ‘dead cross’ negative warning is only relevant when both moving average lines are in fact turning lower. Therefore our strategy turns to selling into strength, now that it seems likely a bear market has begun. The Emini Nasdaq downturn appears to be a little less brutal. We pierced a shorter term Bull trendline tracing back to the end of 2012, but as you can see in the monthly chart below were hovering just above it, as I write. We also managed a bounce well above the first Fibonacci support level of 3825. A look at the weekly chart below shows more clearly how we pierced the two and half year trendline at 3970. At just a fraction above this support, you can also see the blue 100 week moving average. Secondly, this whole 3980/3970 area is good support and the fact that we have not yet seen a daily close below this point is encouraging for Bulls, in the short-term at least. As I write we are holding above the previous 2015 lows seen in January at 4041.50, which is also encouraging. There is also less of the negative pattern to this chart compared to the Emini Dow Jones, but you can see how two trendlines insect around the 4325/4350 area. If this is the beginning of a bear market, we are likely to be unable to break this resistance area before sellers push prices lower again. I will finish off with a look at Europe’s Dax futures market. The monthly chart above shows how the Dax futures have perfectly kissed the longer-term Bull trendline dating back to the end of 2011, when we last saw a significant correction in the market. A very swift bounce off this support means this market action remains in a Bull trend and at this stage, we have only witnessed sharp correction. You will note how we also managed to hold above the important 38.2% longer-term Fibonacci support level at 9053. Let’s zoom in again to the weekly chart for the Dax, which gives further encouragement for Bulls. This week we broke below the blue 100 week moving average and plunged to important trendline support, going back to late 2011. Again you can see how we have perfectly kissed this trendline and bounced perfectly right off this support. Clearly the big players are looking at the longer-term charts for buying opportunities and are reacting accordingly. We even managed a bounce all the way back up to the blue 100 week moving average which of course is now writing at resistance around the 10,000 area. It’s a big round psychological number going to need to see a sustained break above this level for Bulls start to gain control. Again and push up towards 10,600/10,700 resistance. This area will be key going forward. Failure to break back above here signals the start of a longer-term bear market. So from my analysis above you can gauge that in the short-term I am quite bullish and I think there is a very strong chance we seen an end to the correction at this stage. In the short-term markets have become quite oversold and I am looking for recovery into September. However, I do feel that this is start of a longer-term bear trend and I think eventually any recovery will meet very strong selling pressure at the important resistance levels, which I’ve noted above.
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