DAX Market Analysis, June 2020

DAX Market Analysis, June 2020

den 12 juni 2020

In May, DAX continued what it started in April - prices advanced. Hopes that worst of COVID-19 pandemic is behind us and lack of alternatives for stocks continued to drive stocks and indices upwards - making the gap between real economics and stock prices quite remarkable. Central banks also continued, and even further increased, their asset purchases which supported the market sentiment - “Don’t fight the FED”.

In May we concluded that from technical analysis perspective, we can see big moves up or down, with 12000 points as a clear resistance above. DAX did test daily MA50 line at 11830 which was also tops for May, making the monthly candle a typical one for strongly bullish trend. Also volatility and and volumes decreased from April, also a bullish sign.

Trading thoughts: DAX is currently close to its monthly Pivot Resistance 2 -level and upside could be limited. Some short term indicators are in very strong buy -mode and turning into a contra indication. If you are look for weakness (technical or macro data) then enter a short position.

For bullish position, trade should have a stop/knock-out level at least 4% below current levels due to technically stretched indicators. Look to enter longs on pullbacks as long as DAX stays above 12350.

Long term support levels 11855, 11687, 11300
Long term resistance levels: 12400, 13500

Below DAX weekly chart showing also monthly pivot levels. Here DAX has turned clearly bullish. On the upside,monthly Pivot R2 (12839) and 13500 that has been already tested twice, are clear resistance levels. Upwards momentum has been very strong, which usually results in a pullback before next wave up is possible, there monthly pivot R1 at 12213 and 12000 are possible support levels for DAX to test. Next level below would be monthly pivot level at 11187. Now it is important to follow volatility and VIX indicator in US - for bullish momentum to continue, both indicators should continue downwards or max sideways.

Medium term resistance levels:12840, 13500
Medium term support levels: 12200, 11190

The investors’s sentiment in US is still in bearish but the sentiment gap is getting smaller. Lower volatility in the S&P500 is a bullish indication.

June has historically been a weak month for the DAX index.

Shares in DAX index split between ones above and below respective 20 day averages (DMA20). The indicator is close to its maximum value of 100% which has often resulted in a capped upside and sideways price action.

McClellan oscillator is also in bullish mode and still pointing north. The indicator is creating a larger negative divergence which is a sign of warning. The indicator is however a bad timing indicator spotting “market tops” but its divergences have usually been a good sign of moves fading out and a reversal upcoming.

Summary of technical indicators for shares in DAX index. A clear direction is missing.

Historical movements for the DAX index upcoming weeks.

DAX intraday volatility has also dropped significantly compared to the wild movements during the decline. This is also a bullish sign.

Major world futures: short term indicators have moved into strong buy mode.

2020-08-12 05:45:55


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