DAX Market Analysis, July 2022
June was a very negative month for the DAX index, ending the month with a -11% decline which is the biggest decline since 2020. Interest rate hikes by the central banks and heads up for further hikes was like poison to the markets. Last month we questioned if the short-term bullish momentum was a dead cat bounce, or a trend turn to the bullish side - now we know the answer to that question.
June was a
very negative month for the DAX index, ending the month with a -11% decline
which is the biggest decline since 2020. Interest rate hikes by the central
banks and heads up for further hikes was like poison to the markets. Last month
we questioned if the short-term bullish momentum was a dead cat bounce, or a
trend turn to the bullish side - now we know the answer to that question.
The long-term
trend for the DAX index was already in a bearish trend, thus the decline during
June was not a surprise but the magnitude of the decline surprised probably
many. Technically DAX will test the EMA12 moving average sooner or later and on
the downside, yearly S2 pivot (12185) is suddenly a very probable area to be
tested.
Long term
support levels: 11000, 12185
Long term resistance
levels: 13730, 14000, 14200
On the
weekly chart below, it is visually easy to see how the whole June was in a
negative mode - at the beginning of the month DAX went through EMA6 and EMA12
and EMA12 turned into a resistance which DAX was not able to break above. Our
last month short trade idea was functioning for June quite good.
EMA12 and
possible also EMA6 will function as resistance levels on the upside and on the
downside levels 12400-12500 is an area where DAX has found support previously. The
US volatility VIX index has not advanced lately and usually the market bottom
is found after a pike in the VIX index, thus it is probable that the decline is
not yet done.
Midterm
support levels: 12000,, 12400
Midterm
resistance levels: 13400, 13700, 14100
For a long
swing position, it is quite challenging to find good entries. DAX should rise
above EMA6 and EMA12 and find support from these averages - long term swing
positions are to be seen as riskier trades and better long position trades are
probably found from shorter trades on intraday time frames.
For a short
swing trade in current market conditions are much easier, EMA12 and EMA6
averages functions as resistance levels. e.g. TSRT DAX V1395 with knock out at
14155 is a possible trading instrument.
Above: DAX average monthly movement - historically June is slightly positive
Above: Summary of technical indicators for DAX. The message is a clear “sell”
Above: Summary of technical indicators for futures. The picture here is very unclear.
Above: Historical weekly and daily movements for DAX.
Risks
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