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DAX – Even in Record Territory Resistance Can be Found

DAX – Even in Record Territory Resistance Can be Found

What’s inside:

  • DAX closes to a new record high, but not necessarily a reason for ‘excitement’
  • A pair of top-side trend-lines could prove problematic in the area of 13000/100
  • It may not help put in a meaningful top, but could at least dent the multi-week surge

Find out what is expected to drive markets into year-end in the DailyFX Quarterly Forecasts.

We’ve been constructive on Eurozone equity benchmarks for a few weeks now and in hindsight perhaps not as bullish as we should have been given the important breaks we saw in both the DAX and CAC (DAX above 12300, CAC ‘bull-flag’ breakout). The rallies to date since crossing key thresholds have been impressive, with the DAX closing at a new record high yesterday and the CAC staring down the 9-yr+ highs notched in May.

Buyers need to beware at this juncture, though. At first glance, buying new record highs might seem appealing (after all, everything is great, right?), but in our experience, in the long-run, equity indices are best entered on dips or during periods of consolidation versus chasing momentum. Reasoning for not chasing at this point, despite new record levels, is stronger now than at other times.

Even in record territory resistance can exist. Just over the psychological level of 13k lies a top-side trend-line connecting the 2015 and June peaks. Not much further beyond there lies a really long-term top-side trend-line around the 13100-mark. It extends from the 2000 high over the 2015 high. These two lines make the 13000/100 quite important.

These levels might not mark a major turning point, but could put a dent in the recent rally. Depending on how a pullback unfolds from those top-side trend-lines will help determine whether it’s a ‘buy-the-dip’ opportunity or a deeper retrenchment in progress.

Paul conducts webinars Tuesday-Friday. See the Webinar Calendar for details, and the full line-up of upcoming live events.

DAX: Daily


DAX Weekly Chart

---Written by Paul Robinson, Market Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.