DAX Market Analysis, January 2021

DAX Market Analysis, January 2021

20 January 2021

December was another strong month for DAX, gain was +5.5% which is significantly more than historical monthly average of ca 3%. We commented in November that there are good reasons to expect a good December performance but this was even more than we expected. Also volatility was high - during first two weeks of December DAX tested 13500, which has been a significant resistance several times, and as the level held it also offered good shorting opportunities. On the low end, weekly EMA12 line provided support for the rebounds and then on third week DAX managed to break level 13500 up, testing ATH - and then again dropping down to nearly 13000 level. Overall, monthly candle ended as a bullish one but market was more nervous than we expected.

Long trend is clearly up, but also the level of positive delta to EMA6 and EMA12 averages starts to be significant and in the levels where DAX often as bounced back down to test the levels (EMA12 currently at 13090). January has been historically a neutral month for DAX so everything considered, we think one needs to be equally ready for DAX to move up and down from current level (when writing this on Jan 5, DAX is at 13710) - at least to test EMA12 level. It is not obvious that the month would be that bullish.

Long term support levels on monthly chart: 12000, 12700, 13090
Long term resistance levels on monthly chart: 13800, 14070, 14430

Below DAX weekly chart with month’s pivot points visible. We are currently above resistance level 13500 and next ones up are psychological 14000 and monthly pivot R1 at 14070. As mentioned, positive delta to averages as at a level from which DAX often has dropped to test at least EMA12. So trend is up but likelihood for a significant pullback is also high so also January can give us significant volatility.

Medium term levels of resistance: 13800, 14000
Medium term levels of support: 13520, 13200

We believe that market situation offers good possibilities for both long and short positions. For a long position we would wait for pullback to levels mentioned earlier, knock-out level should be at max 13000 or below.

For a short view, we think one should assume 13800 level to be tested and holding.

Above: Investors’ sentiment in US is increasingly bullish - to a point that likelihood for pullbacks is is quite high (contra-indication)

Above: Historically, January has been flat for DAX.

Above: McClellan oscillator peaked high and started dropping again - also this indicator is flagging increased likelihood for a pullback.

Above: Summary of technical indicators for DAX is mostly showing strong buy.

World’s main futures are also in strong buy.

 

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02/12/2021 05:08:03

 

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