05-12-2019 DAX TECHNICAL ANALYSIS AND BUILDING A MOMENTUM INDICATOR

The main factor driving markets is still the US-China trade talks. This ongoing debate is becoming a chore but continues to cause rising volatility thanks to conflicting signals from the US. Trade officials were quoted saying “US and China was moving closer to a phase one deal”, but yet Trump said on Tuesday: “I like the idea of waiting until after the election for the China deal”. Which one is it guys? Come on now. It’s like neither side (within the US) know what the other one is saying. Trump needs China to buy US agricultural goods soon because of the US election. US farmers deliver critical votes in three important swing states for Trump, and have been the main victims on the US side of the trade war. Without a deal to secure China buying farm goods again, it could be very hard for Trump to win the election.

Today’s data highlight is the final Q3 GDP estimate from the euro area. Look out for what drove the growth rate in Q3 because it seems that strong domestic demand has started to feel the pinch recently.

German factory orders and US initial jobless claims are also on the calendar today. In the UK election campaign, Conservative leader Boris Johnson yesterday pledged to deliver Brexit and new tax cuts within 100 days of winning the election, which will be held on Thursday next week.

05-12-2019 DAX Analysis | 60-minute

We can see how price action has bounced from the warning line, circled in the chart below. The bounce has taken the market all the way up to the composite point of control (green rectangle).

In the webinar this morning, I talked about how the profile has a double distribution at the moment and could potentially look to fill out the low volume zone in the middle of the current value area. There is also the chance that it could look to break further to the downside in order to normalise the profile.

The German DAX is currently risk-off.

DAX Webinar Recording

In the webinar, I talked about a momentum strategy you could build using just a single sierra charts study. So if you open up a fresh chart and apply a stochastic study, then add two different ‘Color bar based on alert condition’ studies with the follow code in the Alert tab:

UP ARROW

and(
id1.sg1>id1.sg3,
id1.sg2>id1.sg3,
id1.sg2[-1]<id1.sg3,
bartime>time(08,00,00),
bartime<time(20,00,00)
)

DOWN ARROW

and(
id1.sg1<id1.sg4,
id1.sg2<id1.sg4,
id1.sg2[-1]>id1.sg4,
bartime>time(08,00,00),
bartime<time(20,00,00)
)

05-12-2019 DAX Market Profile

On the market profile, yesterday’s profile action was a P shape. The majority of the volume was in the top half of the profile all of which was above the previous days range. The value area was above the initial balance, and the point of control was inside the value area. However the close last night was above the value area.

These are normally bullish signs, however, when you consider that price action has barely made any progress into Mondays set off, it’s difficult to be bullish right now. The only way I would be bullish right now, is if we break above yesterday is high, which we have already failed to do. So breaking below yesterday’s high volume zone opens up the chances of a further retracement to the downside. It is possible that we see responsive buying around the low of yesterdays high volume zone.

05-12-2019 DAX Analysis Daily Chart

Monday is self reached the median line on the daily pitchfork. So whilst Monday’s price action looked incredibly bearish, relative to previous days, you get more of a sense check when you look on the daily chart. The daily chart shows that that sell-off was not so unusual. Should we now go ahead and take out the previous lows then it’s difficult to argue with the bearish facts.