What’s inside:
- The DAX remains contained within range
- Waiting for confirmed break above or below range
- Volatility dwindles to lowest levels in quite some time
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The DAX continues to see-saw – up, down, up, down – it’s been like this since the calendar flipped to January. Is the market consolidating for another leg higher, or is it finding a top through churning price action? It’s still tough to say without the DAX breaking free of range constraints; the prevailing trend suggests it’s bullish consolidation, but the rejected attempt to breakout last Wednesday may be suggesting otherwise. In any event, a clean breakout is needed.
The congestion period to end December is viewed as pivotal support, the range runs between around 11480 down to 11400. A break below 11400 would be considered a noteworthy negative and bring into play further down-side.
On the top-side, a break and close above 11700 gives the market a little breathing room; resistance comes in not far ahead at the July 2015 peak of 11802 and then the May ’15 high of 11920. Those points of resistance are only 100 and 200+ points higher than last Wednesday high, which for the DAX is often times nothing, but in this low-volatility environment it feels like you’re asking for a lot. One-month historical volatility is at its lowest level since the summer of 2014. The good news with vol hitting such low levels is that we have a higher period of volatility to look forward to; that’s the mean reversion nature of the beast.
For now, we’ll just be patient until the market can break free and provide a better tell on which direction it wants to continue moving in. It’s Martin Luther King Day in the United States, markets there are closed so expect the lack of influence from there to help keep today’s range narrow.
DAX: Daily
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---Written by Paul Robinson, Market Analyst
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