Dax Analysis | German DAX Digests Gains After 400pt Rally

Good morning traders, I will warn you that today my mood is somewhat playfully irreverent, not to be mistaken for morose. Please bear that in mind whilst reading the DAX analysis, I have some time as the DAX digests gains after the excellent rally, for all we know that rally will continue.

The DAX index remained unchanged yesterday despite concerns regarding Brexit, as well as the trade dispute between the United States and China. These are the two main market ‘distractions’ right now (do you notice how there always has to be something to distract a market – I guess we always need something to blame for a market movement rather than understand how the DAX moves). Back to the distractions: the European Union and the United Kingdom both claimed they could reach an agreement on Britain’s departure from the bloc, but warned that there is still a lot of work to be done (so basically nothing has happened) in order to ensure an orderly Brexit at the end of the month (which is still unlikely).

Sometimes I feel many people could thrive as professional politicians, probably the majority of us actually, we can definitely commit to the key competencies; get paid well to achieve very little – point the blame at someone else – negotiate a lucrative job selling secrets to a hedge fund whilst filing another claim for expenses. Sounds good eh.

I digress. Meanwhile, China said it agreed with the US to “work together in the direction of…. blah blah, actually, I’d rather not waste energy talking about the US and president what’s-his-face to be honest, shall we just get back to the DAX analysis, someone said that traders are waiting patiently whilst the DAX digests gains?

DAX Digests Gains

So, what are the facts? The facts are we have a consecutive series of higher highs and higher lows. The recent impulse wave was a bullish rally from the trend-defining low of 12100 up to the current high of 12549, with no significant pullback yet. There is a clear case for a pullback, although never guaranteed.

The upsloping low-to-low trend line has the potential to be a very interesting line to watch over the coming few days, because it could well turn into a centre line. Ive spoken about centre lines many times in the past, as they can be important in action reaction setups. But for now, I am looking at that black line as a target for a pullback, should the 12,549 hold and we fail to break to new highs.

I am watching for a break of the blue upsloping low-to-low trendline as a possible trigger for the pullback, assuming that the 12349-12380 zone is broken with momentum, which I think would be important. If the support zone is just ‘tickled’, then the DAX can just as easily absorb the selling pressure and continue another rally.

Of course, if we do continue higher then we run into the same issues that I discussed in yesterday’s article. We have plenty of resistance around 12,600 to contend with and it may be difficult to break and hold. But for now, the DAX digests gains.

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