Talking Points:
As focus shifts to key central bank meetings to gauge how policymakers are reacting to changing economic landscapes, equities continue to show indecision amid confusion on which direction to take next. Whilst new gains are limited and slightly scary at current levels, markets are also reluctant to undo previous gains, which is leaving many indices in a tight limbo.
DAX 30 Levels
The DAX 30 took a hard dive two weeks ago when a regulation clampdown in China sent major tech stocks tumbling, causing a widespread risk-off move, propelling the German index to a two month low. The index has since then recovered and is back above 15,500 but there is a clear picture of indecision painted on its candlesticks. The daily open-close range is one of the tightest we have seen in a while but there are ling tails either side of the body, which is a clear sign that both buyers and sellers are attempting to break out of the range but are facing strong opposition along the way which is bringing the index right back to where it started.
Serving as further confirmation of indecision both the RSI and the stochastic indicators are sitting bang in the middle of their range, and so is the MACD which has been barely visible above the 0 line for the last 8 days. We’re likely going to have to need a big pick up in momentum to break away on either side, meaning that 15,690 and 15,415 are the key levels to watch.
DAX 30 Daily chart
| Change in | Longs | Shorts | OI |
| Daily | -2% | -2% | -2% |
| Weekly | 3% | 3% | 3% |
IBEX 35 Levels
In a similar fashion to the DAX, the IBEX 35 is also struggling to find a clear path after the recent selloff. The momentum in the upswing has been strong so far but the index has stagnated just below the 8,800 mark. There is a bit more of a bullish bias in the Spanish index but it is very touch-and-go at present, so anything can happen at this point. If we’re able to see higher lows along this week then the IBEX may be in for a new attempt at holding above key resistance at 8,912, but given how the 100-DMA is converging at this level it may take some further consolidation before meaningful progress is made.
Alternatively, if momentum turns bearish once again then 8,624 is the first area to look at for support, followed by the 8,600 mark where the 200-DMA is converging.
IBEX 35 Daily Chart
CAC 40 Levels
The CAC 40 has been the clear outperformer this week and last, with a strong build-up towards the 6,800 mark. The French index has consolidated higher lows and is inching closer to breaking its all-time high, which currently stands at 6,944.8 and was achieved way back in August 2000. Ever since 2007, the CAC had remained below the 6,000 mark until January 2020 before the pandemic outbreak. The strong recovery in equities post-pandemic has served to build up the momentum needed to attempt a new all-time high so it seems slightly inevitable that we don’t see it happen in the next few weeks. There is likely to be some resistance along the way but I would expect buyers will be aiming at 6,800 in the short term, at which point there is likely to be a pullback as exhaustion may creep in. If so, I would expect the 6,600 mark to offer some good support.
CAC 40 Daily Chart
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--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
