Keep an eye on German politics, particular whether we should expect the SPD to pull support for the coalition government at the party congress next weekend. But today is thin in the way of economic releases so more focus will be on the US decision to target other countries on trade.
We can see that the Dax was very heavily rejected yesterday at 13,340 leading to a 350+ point sell-off. You could perhaps blame the beginning of the month, or you could perhaps blame the concerns with the US-China trade wars. But there are also the ongoing issues with the SPD, which is certainly having some influence.
Yesterday, Trump announced that the US will impose tariffs on steel and aluminium imported from Argentina and Brazil due to ‘massive devaluation of their currencies’. China has substituted away from US soybeans by buying from Brazil and Argentina and US farm states are important for Trump’s re-election chances.
A bigger concern perhaps is that the US has proposed tariffs on roughly USD2.4bn on imported goods from France as retaliation for France’s decision to implement a digital tax. The hearing process will begin on 7 January 2020 and the proposed list of products includes wine, cheese, handbags and makeup. France has so far declined to comment but French president Macron and US President Trump are expected to meet during the NATO leader meeting, which begins today.
So let’s take a look at the technical analysis.
03-12-2019 60-minute DAX Analysis
The sell-off yesterday started with a rejection at the median line on the pitchfork (see chart below). Can you also see how price found the warning line at the bottom of the fork? The warning line is the parallel extension of the lower median line, it’s the lower circle on the chart.
If the market does bounce from here today, the obvious target will be the high volume node that you can see circled at 13,129.
You could also say 13,158 is another target because of the low that you can see circled on the 29th of November. Those two prices create a bullish target zone.
However, if we get some continued volatility today, then it’s possible that many stop losses will be tagged whilst attempting longs. Stop losses are a part of trading. Get frustrated with them if you like, but you can not avoid them!
Longs at this stage should probably be seen as nothing other than a minor relief rally after a sharp sell-off.
03-12-2019 DAX Analysis – Key Levels
|Point of Control||12990|
|Value Area High||13226|
|Value Area Low||12941|
03-12-2019 DAX Webinar
Take a look at yesterday’s FDXM trading volume around the high, just before the sell-off began. I spoke about whether we may have seen some interesting absorption as aggressive buying failed to make any progress to the upside. As soon as the aggressive buying stopped, the market tanked.