DAX Market Analysis, March 2022
DAX started pulling back from highs in February, mainly due to rapidly increasing inflation and related concerns on raising interest rates. This trend down strengthened significantly when the crisis in Ukraine started and in this current situation the value of any technical analysis is fairly low. Volatility is high and near term direction for DAX is most likely determined by the developments of the war in Ukraine rather than any technical or historical level in DAX.
DAX started pulling back from highs in February, mainly due to rapidly increasing inflation and related concerns on raising interest rates. This trend down strengthened significantly when the crisis in Ukraine started and in this current situation the value of any technical analysis is fairly low. Volatility is high and near term direction for DAX is most likely determined by the developments of the war in Ukraine rather than any technical or historical level in DAX. In February, we mentioned that technically it looks like DAX is forming a top (topping pattern) but the strength of the move down, as well as events in Ukraine, have certainly surprised everyone.
In monthly chart (below the next major long term levels are yearly pivot S2 and previous levels of consolidation at 12200-13000. Exponential moving average EMA6 has now crossed below EMA12 and DAX is below both averages so also technically speaking DAX is in down trend in this long timeframe. However it should be noted that EMA6-EMA12 cross down has not been historically a very good trend indicator in this timeframe and can also indicate that the lowest point is near. DAX dropped over 8% in February and when writing this (March 5) we have already seen similar level of negative movement for March so the trend down is strong. Yearly pivot S1 (14030) did not provide any support for DAX.
Long term levels of support: 12200, 12500, 13000
Long term levels of resistance:: 14000, 14800
Weekly chart below, representing mid-term trend. Here DAX was technically in downtrend already in February and we could see EMA6 and EMA12 averages acting as clear levels of resistance, while previously they have worked as clear levels of support.
Weekly movements were net negative but more moderate prior to war starting in Ukraine, and after the conflict started the momentum became significantly stronger.Monthly S1 and S2 pivots (13590 and 12733) may offer support, however when writing this DAX is already below S1 pivot. Next significant level down after those is 12000. In a downtrend it is common to see also surprisingly strong legs up and if that happens, weekly EMA6 and EMA12 averages are possible levels of resistance (currently at 14700-15000 but dropping rapidly)
Long term levels of support: 12700, 13000, 13590
Long term levels of resistance: 14000, 14700
For a long swing position it is almost impossible to find a good entry based on technical analysis. DAX movements are currently shaped by news from Ukraine and e.g. possible positive news on ceasefire could very well result in significant movement up - and vice versa. As mentioned, within strong downtrend there can be strong legs up - in current situation it is best to try to find those from intraday trends.
For a short view, entries are a bit more “easy” - although also here it is good to keep in mind that voltility is high and it can result in significant intraday movements up, even if the net movement for the day is negative.Possible entry point could be weekly EMA6-EMA12 averages, so around 14700 currently (but dropping so follow the actual value) - they are possibly strong levels of resistance and DAX to move above them could indicate return of trend up. For this strategy, a possible product could be e.g. TSRT DAX V1241:
Above: DAX average monthly movement - historically March has been slightly positive
Above: McClellan oscillator is very bearish - up to a point that pullback upwards starts to be likely before potentially more down. But due to ongoing situation with the war in Ukraine it is very hard to estimate based on technical analysis
Above: Split of stocks in DAX index that are above or below their respective DMA20 averages. Also very negative picture here.
Above: Summary of technical indicators of stocks in DAX index. Message is clear and indicates a sell situation
Note: Historical performance is not a reliable indication of the future.
Above: DAX historical weekly and daily changes
Risks
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