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DAX 30 Gains But Only Within Most Recent Range

DAX 30 Gains But Only Within Most Recent Range

2016-05-24 09:59:00
Alejandro Zambrano, Market Analyst
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Talking Points

  • The DAX 30 is trapped between the May 6 low of 9739 and the May 10 high of 10,111.
  • The nearest support level below the May 6 low of 9739 is the April 12 low of 9617, while the nearest resistance level above the May 10 high of 10,111 is the May 2 high of 10,154.
  • The German ZEW Expectations declined to 6.4 from the 11.2 prior, lower than the 12 expected as per a Bloomberg News survey.

It appears that each time price fails to trade lower, traders attempt to test the overhead resistance. This has been the norm as of late for the DAX 30, confined to the narrow range of 9776-9973 since Wednesday of last week. Looking beyond the narrow range mentioned above, price is also trapped between the May 6 low of 9739 and the May 10 high of 10,111. These levels are more important as price spent almost four weeks trading sideways between them.

Support levels below the May 6 low of 9739 are the April 12 low of 9617, the April 11 low of 9528 and the April 7 low of 9447. Resistance levels above the May 10 high of 10,111 are the May 2 high of 10,154, the April 29 high of 10,254 and the April 28 high of 10,333. A break to the above-mentioned range is probably needed for a strong trend to develop.

Our Stock Market forecasts for Q2 2016 are now live on the site. Download them for free.

DAX 30 | CFD: GER30

Please add a description for the image.

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

The final estimate of first quarter GDP showed that the German economy had risen by 1.3% YoY, unchanged from the 1.3% experienced in the fourth quarter.

The German ZEW Expectations declined to 6.4 from the 11.2 prior, lower than the 12 expected as per a Bloomberg News survey. The index has a mild correlation to year-on-year changes of the DAX 30 as seen in the chart below. In fact, the German ZEW expectations index (black line) will sometimes lead the YoY change to the DAX 30 (red line).

The German ZEW Expectations index (Economic Sentiment), queries 300 financial experts about their view on the German economy 6 months into the future. The index experienced a steep decline since March 2015, the same time as the DAX 30 peaked last year. However, since late 2015, the index has stabilized and the DAX 30 has followed a similar pattern. Today’s decline in the German ZEW Expectations suggests that the DAX 30 should remain range bound if the correlation remains intact. The DAX was little changed following the news.

DAX 30 YoY vs. ZEW Expectations index

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Data source: Bloomberg

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00

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