What’s inside:

  • The DAX taking a hit to start the week
  • Bringing two forms of support into play
  • Above support bias is neutral to bullish, below turns bearish

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This morning the DAX is taking a hit off the swing highs created Thursday on the back of a couple of developments to start the week (details here), causing the German index to test a key area of support. It looked as though momentum built up into the end of last week would result in a push to the 10800 at the least before seeing a decline, but sellers emerged quicker than anticipated.

The current area which the DAX sits is a key area of support dating back to April when the index turned lower from just beneath 10500 and again later in August, before becoming support twice during the same month. If we don’t see a turnaround from current levels, not far below is a trend-line extending higher from the post-Brexit lows.

The trend is still higher following the late June lows, while the more immediate trend since the middle of August is lacking, making drawing conclusions beyond a day or so difficult at this time.

We will operate off the notion that as long as horizontal support or the trend-line holds, then we will continue to give the benefit of the doubt to a neutral to bullish bias. However, a daily close below both angles of support (<~10375) will strengthen the case for shorts.

DAX Daily

DAX: Taking a Hit to Start the Week, Probing Support Zone

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---Written by Paul Robinson, Market Analyst

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