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DAX 30 & CAC 40 Charts: Resistance, Relative Weakness Remain Headwinds

DAX 30 & CAC 40 Charts: Resistance, Relative Weakness Remain Headwinds

2019-02-20 12:00:00
Paul Robinson, Strategist
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DAX 30/CAC 40 Technical Highlights

  • DAX lagging other indices, big resistance to contend with
  • CAC has resistance and bullish channel in focus

To see our intermediate fundamental and technical outlook for the DAX & Euro, check out the DailyFX Q1 Forecasts.

DAX lagging other indices, big resistance to contend with

The world’s largest and strongest stock market continues to put in a strong showing, but that could soon come to an end, as the S&P 500 is on the verge of trading up against strong resistance surrounding 2800. The DAX is not only severely lagging the U.S. but is also lagging in its own region (CAC).

This relative weakness in of itself is a bad sign for the DAX, add in the fact that it also has strong resistance which it can’t hurdle, and you have a situation where it won’t take much to knock the German market low.

The 2011 trend-line has been a problem ever since it was broken. This morning the Feb 5 high was breached, however; at this time the DAX is failing to maintain above. Even if it closes strong today, not far above lies a trend-line from the summer and the neckline of the H&S pattern dating back to 2017.

Those levels are above the 2011 trend-line, but not far enough to make reaching them a convincing recapture of the broken long-term trend threshold. The region from here up to just over 11500 is important.

Tactically, it would be ideal to see the S&P push into resistance and have the DAX continue to remain sluggish at resistance. If relative weakness is to hold true, then a global turn lower in stocks should see the DAX lower in aggressive fashion.

DAX Weekly Chart (2011 t-line, H&S neckline)

DAX weekly chart, 2011 t-line, H&S neckline

DAX Daily Chart (A lot of resistance in the area)

DAX daily chart, a lot of resistance in the area

CAC has resistance and bullish channel in focus

The French benchmark is pressing up into an area of resistance dating back to the middle of last year. Running lower into this zone is the 200-day MA, making the 5200/50-region an important one. The upward channel structure off the December low will need to be broken for selling to pick up, but given its sharp angle and heavy DAX this seems likely to happen on a round of weakness.

CAC Daily Chart (Resistance, bullish channel)

CAC daily chart, resistance, bullish channel

Want to learn more about trading the DAX? Check out ‘How to Trade the DAX’, and join me weekly for technical updates in the Indices and Commodities webinar.

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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

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