DAX is showing short-term strength but the long-term trend is negative
Last week German DAX showed short-term strength and moved up heavily from an earlier technical oversold level. However, the long-term trend looks most likely to be pointing downwards with a strong resistance area at 12 600- 13 000. If the DAX would start finding ground above this area combined with an increasing volume this could potentially indicate further strength. In the case the index drops below support levels at 12 280, the index might show weakness. Long-term negative momentum could be triggered if support level at 11 830 is broken.
Last week German market had an increasingly strong development. DAX index closed the week at 12 483,79, up 3,6 percent. The decline this year has therefore decreased to -4,4 percent.
The strong movement on the market came from an earlier technical oversold level and came as a reaction to a positive news feed, including the information that the German social democrats SPD voted yes to form a new government coalition with Angela Merkel and CDU.
The parliament elections were held in September and since then there has been great doubt over the potential outcome. But now, at last, this political uncertainty is over.
The development last week is indicating more that it is likely that a trade war could be avoided. The White House declared that Mexico and Canada would receive temporary exceptions from the previously announced tariffs on steel and metals. The expectations enlarged that EU could receive the corresponding exceptions.
The German market also took positive from the European Central Bank, which as expected kept interest rates at record low levels.
Despite the sharp upswing last week, the long-term trend for the DAX is still not looking too good. DAX has in the weekly charts earlier this year triggered weakness when it broke support levels and its positive trendline. Furthermore, the index lies under its 40-week moving average, which is now also pointing down. These could be indications of a negative long-term trend.
Weekly chart of the DAX
If the index starts finding ground over resistance level at 12 700- 13 000 in combination with increased volume, the index might be about to show long-term strength.
Should the DAX drop and find ground below support levels at 11 830, it could potentially be about to show further weakness ahead.
Stochastic indicator in the weekly charts shows that the DAX is still technically oversold. If the case, like last week, the DAX receives a positive news feed, this could facilitate the index to bounce upwards.
In the daily chart the index is in a consolidation phase within the downward trend with support levels at 11 830. Breaking these levels could possibly be a negative indication onwards.
Daily chart of the DAX
The consolidation area has its first resistance area at 12 600. Establishing over this could be a sign of strength.
In the hourly chart the DAX demonstrated short-term strength when it broke resistance at 12 000 and 12 280. Further ahead, resistance at 12 410 and 12 600 is of interest. In the case the index would break support at 12 280, DAX might trigger weakness. In addition, important support levels are at 12 000 and 11 830.
Hourly chart of the DAX
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