Thursday 22nd January 2015 is a day I shall never forget. I will spare you the details of my trading, the details are on my twitter and stock twits page as DaxTrader54.

http://stocktwits.com/DaxTrader54

https://twitter.com/DAXTrader54

Market Analysis

So the ECB has embarked on a €1.2 trillion asset purchase program, which was received very well by the markets. The announcement was a little higher than expected with €60 billion of assets being purchased every month until September 2016. In the hope that this stimulus brings the economy within the confines of their mandate which is to maintain price stability within the eurozone measured by inflation being close to 2%. But all is not necessary well, here’s a good roundup:

Quoting Andrew Sentance:

The ECB plans to buy €60bn of assets each month, equivalent to around 7% of Eurozone GDP. When the Bank of England launched its QE programme in 2009, bond purchases totalled £25bn, per month, over 20% of GDP. The ECB has left it much longer than the UK and US to launch QE, and the experience of Japan in the 1990s and 2000s suggests that delaying policy responses allows economic and financial problems to become more deeply embedded. Also, longer term interest rates in the eurozone are already very low, which reduces the scope for QE to influence financial markets by pushing down bond yields. There may be some benefit to European growth from a weaker euro, though this will also result in higher import prices, squeezing consumer spending. QE does not address the major structural factors holding back the eurozone economy. Growth is very weak in France and Italy, the 2nd and 3rd largest economies using the euro which account for nearly 40% of eurozone GDP. Businesses are reluctant to invest, labour markets remain inflexible and governments have been slow to undertake much needed economic reforms. Until these issues are addressed, we are likely to continue to see disappointing growth in the euro area economies.

So it’s very easy to be wrapped up in the bullish “money is flowing” mentality, like I am, but we should be mindful of the underlying issues which still need dealing with. The bigger problem is that the Eurozone’s trend or potential economic growth rate has declined. To lift economic performance over the long-term, governments need to step up structural reforms. Another topic altogether, let’s sweep that under the carpet for now, and bask in the bullishness.
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Support & Resistance

KEY LEVELS
Daily R2 10743
Daily R1 10623
Daily Pivot 10427
Value High 10400
24hr VWAP 10343
34 Hour EMA 10341
Daily S1 10307
Naked VPOC 10301
Value Low 10251
Daily S2 10111
200 Day EMA 9544

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Dax Technical Analysis

Daily Chart

we have broken above the .618 fib extension after four days of being held under it and are now at all time highs heading up towards the 11k level. Initial targets are the 10951 100% extension from the Oct-Dece swing. The bullish trend channel is still in play and I would be expecting a pullback fairly soon towards the 10k level before building from there even higher.

Dax Daily

Dax Daily Chart

Intra-Day

Intra-day we have broken out of the top of the slimmer bullish channel and will likely move back inside, perhaps finding support at the daily pivot. The 34-period EMA is above the daily S1 so there would be plenty of support there, but if we get that far tomorrow, we could even test the lower band of the trend channel or temporarily break out and reach S2. It would be unlikely that we get lower than that today. The upside seems to be unlimited, but realistically 10750 is unlikely to be broken as this would be the R2. A close tomorrow above 10500 would be significant.

Dax Intra-day

Dax Intra-day Chart

Volume Profile

The volume profile concurs with the over-bought argument we are above the deviation band, very overbought indeed. VWAP is lagging way down at 10343. Breaking 10400 opens up the naked vpoc at 10301, which should hold, but if it doesnt the first target is 10251 (value area low for yesterday) and then we’ve confirmed we are heading back towards 10k for a pullback. Falling to 10300 would not be a disaster, in fact I would welcome it and buy from that level.

Dax Volume Profile

Dax Volume Profile

Overall Market Snapsnot

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All Signals

Market Overivew

How to Play Today

My preferred action: buy the pullback, ideally 10100-10175 otherwise 10200-10300. There is German data coming out around 8:30 which could spark the pullback necessary to find a better buy in, so this could please the bears in the early morning if the data is good and the bulls in the late morning as general sentiment takes over again.
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