DAX Market Analysis, May 2022
April became an unusually interesting month as volatility was high - difference between beginning and end of March was only ca +80 points but range for the month was ca 2500 points - so plenty of opportunities for traders. From a technical perspective, monthly candle for March is slightly bullish but there is no technical clarity that DAX would turn back upwards from here.
April closed the month in a technically expected way - EMA12 moving average functioned as a resistance on the upside and EMA12 also crossed EMA6 which turned the long term trend downwards into a bearish flag.
DAX closed the month roughly at -3% and the monthly S1 pivot point (seen in the weekly chart) provided support which also was tested. Last month we mentioned that historically markets quickly rebound after starting a war but that probability does not seem quite likely now and worries about a rising inflation and interest rate pressure are a heavy weight on the markets. Also issues in logistics and the lack of components could have a further negative impact on companies revenues. Right now the long term trend is bearish for the first time since the beginning of year 2020, when DAX after all quite soon after the bearish cross turned back into a bullish trend within a few months.
Long term support levels: 12185, 13000, 14030
Long term resistance levels: 14500, 14650, 15150
Below the weekly chart - with the exception of the last week in April, the weekly candlestick technical pattern was bearish where EMA6 and EMA12 functioned at first as support and then turned into a systematic resistance once DAX closed below.
Our message is as boring as previously - the weekly chart EMA12 + EMA6 could be a good indicator to follow and to use them for entering positions; look to enter short when below and when DAX retrace towards the moving average. The pivot points S1 and S2 on the weekly chart are most likely functioning as more important support, that is look to exit shorts is a good option to consider if and when these pivot points are reached.
Mid term support levels: 13050, 13570, 14100
Mid term resistance levels: 14140, 14330, 14600
For a Long swing position EMA6 and EMA12 are to be monitored - if DAX climbs above these averages, these EMA -levels should function as support on pullbacks if the trend is to continue upwards. Besides that, as long as EMA12 is below EMA6, our message is to be cautious with long term swing positions. Preferably EMA6 should be above EMA12 for a more sustainable long term bullish trend. At the moment a potential long swing trade would be if for example the monthly pivot point S1 at 13574 and a exit around the EMA levels. Example of a long swing instrument TLNG DAX V1340
For short trade, the setup is more straight forward - both EMA6 and EMA12 are good entry levels if they seem to give resistance for the index when they are tested. Example instrument: TSRT DAX V1302
Above: DAX average monthly movement - historically April has been neutral
Above: McClellan oscillator is surprisingly in neutral territory
Above: Split of shares in DAX between those above and below their respective DMA20 averages. The indicator is still very negative, also suggesting possible rebound.
Above: Summary of technical indicators for DAX. The technical picture is unclear.
Above: Historical weekly and daily movements for DAX.
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