DAX Technical Analysis

After a quiet session on the market yesterday, the DAX ended in the red. The market was trading in a 55 point range from most of the session until the mid-afternoon. I can see now that the price has managed to find its way down to the ignition point after NFP on Friday. And as a result we have re-visited the high volume zone at the bottom of the double distribution day we discussed in yesterday’s article. Today we have already broken below yesterday’s low, challenged the 13,000 handle again and are suggesting further momentum to the downside.

Perhaps the warning sign was the failed attempt to break above the recent highs, as discussed in the video below. Come and join us for the morning webinar on our Twitch channel.

DAX Key Levels

10-12-2019 DAX Key Levels
MethodPrice
VWAP13128
Point of Control13144
Value Area High13166
Value Area Low13120
Pivot13104
R213210
S212999

The market profile below shows that we had a confined initial balance yesterday, which oscillated around Friday’s point of control. We had a range extension to the downside enclosed at the bottom of the profile. Today’s distribution range fits entirely inside Friday’s distribution range, which, in itself, fit inside of Thursday’s range. This means we have two consecutive inside days. Think about that in terms of the spring. When you push down on spring what happens? You get potential energy building up. The more you push down the more energy builds up as the spring coils. When you let go of the spring that potential energy translates into kinetic energy which is movement. And that movement shoots off in One Direction. The markets do the same thing. When you get compression in the market you’ve got a buildup of potential energy. When you continue to compress the potential energy builds, So when that compression breaks you will see kinetic energy and movement in the market.

And we look at the cumulative Delta on the futures chart, I can see that there was no appetite for aggressive buying. As Delta was printing a higher high, price was printing a lower hi. This could be considered divergence and shows signs of absorption. Hence why the market continued to move to the downside with no aggressive buying to challenge the shorts.

10-12-2019 DAX Delta

Upcoming Events Today

Compared to yesterday we have a busier day ahead of us with lots of interesting data releases. We have the monthly UK GDP estimate for October. We have the UK PMIs suggesting that underlying growth remains weak. Also we have the, German ZEW expectations expected to show a small rebound. Note as well that YouGov is set to publish a new seat projection for the upcoming UK election tonight. The last prediction released a couple of weeks ago showed a solid majority for the Conservatives and given that it was the only projection that correctly projected Theresa May would lose her absolute majority in 2017, investors and Brexit watchers will analyse the results thoroughly.

The News

Most European stocks close lower yesterday as traders continue to focus on trade developments. French finance minister warned the Paris would file a complaint with the WTO if Washington goes ahead with tariffs on French produce. The main losers on the decks yesterday were Adidas and Merck at -1.5% each. MTU Aero Engines were the big winner at +2.41% on the day.

Donald Trump Says China trade talks ‘going well’ again. Thanks Donald for yet again failing to expand on any details that can be considered useful. Intel makes a chip for quantum computing meant to accelerate the development of quantum computing systems. There is a looming deadline on the 15th of December for fresh US tariffs on Chinese goods which will have an impact on the American market this week. Of course we also have the UK general election which will have an impact on the UK markets this week. Jeremy Corbyn is very confident of labour’s chances. And other polls are actually suggesting that Conservatives maybe don’t have the lead that they expect. It’s all just noise at the moment. Volkswagen are once again in trouble, this time in Canada, for breaking environmental laws with their cars. We can continue to chalk that one down to the dieselgate scandal.

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