The DAX 30 Tries to Levitate, Whilst the FTSE 100 and S&P 500 Sink

2015-11-13 11:56:00 Alejandro Zambrano, Market Analyst

As price has not been respecting our previous trend defining levels of 10,770 and 10,730, I adjust my trend defining level for the DAX 30 to 10,687.

Usually when price breaks a level it would cause the price trend to shift, however, this has not happened when price has crossed our above mentioned levels. Instead, the DAX index has been continuously fluctuating back and forth through our levelswith no trend shift.

The 10,687 level is the October 27 low. Beyond this level the next major support level for the DAX is the October 27 low of 10,078. As the gap between these levels is big, I assume bullish traders will be keener on closing out long positions, while bearish traders will be interested in short-selling the DAX index given the good reward potential.

Don't Hold Your Breath

While a break to the 10,687 level should turn the DAX bearish, I see it as fairly unlikely that the DAX 30 will reach the October 27 low at 10,078. The ECB is currently supporting the market and we would need a slowdown in the global economy to encourage a major selloff, something that has only just occurred in the third quarter.

With this in mind, a 50 percent correction targeting 10,474 of the ECB fueled rally from 9892 to 11,058 is more plausible than a complete retracement of the rally. In the case 10,474 is breached, the DAX may reach 10,338 and therefore providing for a 61.8% correction.

If the DAX fails to break the 10,687 level, it may stage a rebound to 11,000.

Data reports on tap this afternoon are both U.S. retail sales and the University of Michigan consumer confidence survey. Better outcomes than expected may prompt a rebound, while the risk of a successful break will increase following a softer than expected outcome.

Economist consensus expects that the retail sales headline number will rise by 0.3% MoM and that retail sales minus the auto stats will rise by 0.4% MoM. The retail sales control group is expected to rise by 0.3% MoM and the U. of Michigan consumer confidence survey is expected to print 91.5.