“Well… that escalated quickly.”
Good morning, traders. If you’re still recovering from yesterday’s face-ripping rally, you’re not alone. After teeing up for a breakdown and stacking up every textbook bearish signal possible, the DAX did what markets often do best—embarrass technical consensus and rip to the upside.
Let’s break down what actually happened, what we missed, and where we might be heading next.
📉 Market Recap – Monday, May 19th
Despite all indicators pointing toward a breakdown below 23,682, the DAX reversed violently from the brink and surged over 300 points, reaching just shy of 24,100 before pulling back modestly overnight.
What Drove the Rebound?
- U.S. Fed Comments (Dovish Tone): Multiple FOMC members walked back aggressive rate hike language during late afternoon speeches, signaling policy flexibility—risk assets loved it.
- Technical Bear Trap: The early test of 23,682 sucked in short positions which were rapidly squeezed, creating momentum upside.
- Liquidity Vacuum: Thin liquidity during the reversal accelerated the spike, exaggerating the move into the U.S. open.
🟢 Result: DAX closed firmly above previous resistance and flirted with R1 pivot by the close.
📅 Economic Calendar – Tuesday, May 20th
Today’s releases are lighter, but carry short-term relevance.
- 🇪🇺 Euro Area Consumer Confidence (16:00 CET) – Expected to stay weak at -14.5. A positive surprise could underpin sentiment.
- 🇺🇸 FOMC Minutes (20:00 CET) – Traders will look for confirmation of yesterday’s dovish tone.
🧠 Macro Implication: The narrative has shifted. Barring hawkish surprises, central bank flexibility is back in play, supporting risk assets near-term.
📈 Technical Outlook – Tuesday, May 20th
We now pivot from a bearish framework to one that respects the reversal while watching for potential exhaustion or continuation.
📍 Chart 1: EMA Cross, RSI, Volume
- EMA Cross: Bullish realignment of shorter-term EMAs. Clean alignment of the 3/5/9 EMA stack = short-term bullish.
- Volume: Spike during the rally shows commitment, but pullback volume is lighter = healthy correction.
- RSI: Hovering at 36.7, attempting to rebound after oversold dips.
➡️ Signal: RSI divergence and bullish EMA stack show bullish pressure remains. Dips may be buyable toward 23,900.
📍 Chart 2: Bollinger Bands & ATR
- Bands: Price broke the upper band yesterday, now reverting inside = consolidation phase.
- ATR: Surged to 20.04, highest in a week = volatility is back.
➡️ Signal: Expansion followed by reversion. High volatility pullbacks could be shallow—buying interest likely above 23,850.
📍 Chart 3: MACD & ADX
- MACD: Crossed down, but lagging behind price action—momentum divergence.
- ADX: Fading from highs, now at 16.9. Trend weakening, likely consolidating.
➡️ Signal: Short-term pause, not reversal. Watch for MACD flattening or re-cross to the upside.
📍 Chart 4: Support & Resistance
- Key Resistance: 24,028–24,076 zone (multiple touches).
- Support: 23,914 and 23,717.
➡️ Signal: Break and hold above 24,076 unlocks 24,175–24,300. Support holding at 23,914 keeps bulls in control.
📍 Chart 5: 40 SMA (15 Shift)
- Price above the shifted SMA, flipped from orange (bearish) to blue (bullish).
- Trend flipped back to the upside convincingly.
➡️ Signal: Medium-term trend now bullish. Any pullback to 23,800–23,850 is valid dip zone.
📍 Chart 6: Peak Reaction Zones
- Upper Zone: 24,076 (tested yesterday, now resistance).
- Lower Zone: 23,717 and 23,358.
➡️ Signal: Price has moved cleanly out of previous upper reaction zone. Holding above 23,900 will maintain this new leg.
📍 Chart 7: Daily Pivot Levels
- Pivot: 23,928
- R1: 24,175
- S1: 23,804
➡️ Signal: Currently hugging Pivot. Above = bullish continuation bias. Below 23,804 = watch for breakdown attempts.
🎯 Trading Signal – Bullish Dip Buy Setup
Setup: Buy near 23,900–23,880 support
Entry: 23,885
Stop: 23,775 (110 pts risk)
Target: 24,215 (3:1 reward)
Rationale: Flip in trend confirmed by SMA and EMAs, RSI recovering, price bounced from support + near pivot cluster. Volatility provides range expansion.
🧩 Summary – What’s Driving the DAX Today?
- 🏛️ Central bank pivot talk is supporting global equities.
- 🧨 Yesterday’s “bearish setup” got squeezed hard—reminding traders to always respect reversals.
- 📊 Technicals have flipped bullish across most metrics, but consolidation is likely around 23,900–24,000 before the next move.
- 🧭 Watch 24,076: clearing this opens the door to 24,175 and beyond.
🔔 Stay nimble, stay humble—markets love to humble us all.
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