DAX/CAC Technical Highlights:
- DAX yet to show signs of reversing despite resistance
- Big-picture topping potential remains
- Strength has the CAC trading in ‘open space’
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DAX yet to show signs of reversing despite resistance
The DAX rally off the lows found opposition last week after a slight breach above a swing-high in February and just below the 200-day MA, however; the reversal sparked only very minor selling. Yesterday’s turn back higher has the market geared up to take on the 200-day and better.
On a breakout above the 200, a thorough testing of the underside of the double-top from November-January should be in play. The zone extends from 12745 up to the mid-12800s and is likely to prove problematic. How problematic, we’ll need to wait and see.
Should we see a strong rejection, then we’ll perhaps flip the script to a short bias, but if it is anything like what we saw this past week, then we’ll need to respect the trend off the March low. There is still the possibility that we see a long-term top develop should we see a strong turn down in the weeks ahead.
We’ll delve more into the ‘head-and-shoulders’ top scenario at a later time should it become relevant. If this scenario is to come to fruition, it's worth noting that the DAX shouldn't climb too much higher from current levels.
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DAX Daily Chart
Strength has the CAC trading in ‘open space’
Of the two big Euro-zone indices, the CAC has been an absolute monster off the late-March low. Nothing has provided any real opposition, not the 200-day MA, not the late-Feb swing-high. Looking higher, there isn’t much preventing the index from trading higher towards the January high, 2007 trend-line.
This doesn’t mean the index will necessarily get there without set-backs, or at all, but as far as quality price levels to lean on, resistance is difficult to come by. As long as we don’t see a strong turnabout in momentum, the benefit of the doubt remains with the long-side. Support first clocks in at the Feb swing-high around 5363.
Heads up, the ECB meets on Thursday. For live coverage, you can join my colleague Nick Cawley at 11:30 GMT time.
CAC Daily Chart
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---Written by Paul Robinson, Market Analyst
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