DAX: Adding to Friday’s Surge Despite No Confirmed Deutsche Deal

What’s inside:

• DAX takes back all of its losses on Friday from key support
• Still no deal for Deutsche Bank, but market acting upbeat about the situation
• Overall, still no trend for the market, but bias upward; key levels in focus

After a day off to start the week, Germany is back to business as usual. On Friday, the DAX was taking a hit on escalating fears surrounding Deutsche Bank. News circulated early on Friday that the bank could have its settlement with the U.S. Department of Justice reduced from $14 billion to only $5.4 billion. Hopes of a much better than expected deal sent shares of Deutsche and the DAX rallying sharply to end the week.

Today, still no deal, but buyers are stepping in as market participants look to be expecting the best, and in return the DAX is finding follow-through bids from last week.

The gap down rally on Friday began from a crucial spot on the chart – a back-side retest of the 2015 down-trend line broken back in August.

This is what we had to say in Friday’s commentary:“This is an important spot for the market to bounce from and sustain. It will be challenging as the trend structure and market jitters are not providing a favorable environment. If the DAX can mount a strong recovery from today’s lows and close anywhere near unchanged, it could mark a significant inflection point in market sentiment.”

Indeed, the market rallied sharply from support, and as a result of the intra-day recovery, the importance of the 2015 trend-line and Friday’s low at 10190 as a signficant inflection point can't be overstated at this time.

Generally, the DAX remains in a choppy environment, making it a tough market for positioning beyond the 1 to 3-day time-frame. However, with that said, given the powerful surge from support on fear tilts the path of least resistance upward.

In the near-term, resistance comes in at the upper parallel off the 9/8 swing high, then the 9/22 high at 10705, and finally the 10780/802 area before moving to the best levels of the year.

Minor support arrives at the trend-line off the June low and then the low to end last week at 10190.

DAX: Daily

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---Written by Paul Robinson, Market Analyst

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