Technical Analysis - German DAX 30

As I mentioned at the open this morning the chances for a little bounce are very high but the bounce was very weak. The German DAX could close the gap but failed then at the 5600 level. In my opinion there is still no bottoming process in work and therefore my target around 5000 to 5200 is still intact.

Between today's close and my target zone is just one level which could support the stock index and that is 5340. Nevertheless my main scenario is DAX down to at least 5200. From there we could see a little bounce into the year-end before selling off really hard.

Why I am still very bearish? Take a look at the weekly chart of the DAX.

This chart shows the German DAX 30 on a weekly basis with the 50 week exponential moving average. There are some outstanding similarities on the chart. The selloff in 2008 was similar in intense and time compared to this year's selloff. The rebound in 2008 stopped right at the 50 week exponential moving average like in October 2011. Maybe we will see a small bounce into year-end but then I think we could see a plunge into mid 2012.

DAX 5500 - Market Analysis

The DAX reached 5500 points in the premarket. I think there is a good chance for a rebound towards 5750. At least the gap should get filled today. I still do not think that this is THE bottom. After a retest of 5750 I think we are heading lower. For sure we could fall to 5000 without any rebound and without closing the gap but in my opinion this is a very low probability scenario.

DAX Analysis

Today's action was very negative. The German DAX 30 closed at the lows of the day at 5606 on higher volume.
As long as the DAX 30 stays below 5800 there is a first downside target around 5000 to 5100.
What this action means in a bigger timeframe will be discussed in one of the following posts.
Nevertheless keep in mind that a close above 5800 would be a first indication that today's sell signal was a false break to the downside.

SMI (Swiss Market Index CH0009980894) and Nestlé (CH0038863350)

The SMI compared to other indices had a very weak recovery from the 2009 lows and since early 2010 the SMI could not make new highs. It also crashed much harder in August 2011 and nearly reached the 2009 lows. On the monthly chart you can see two big reversal candlesticks but nevertheless the recovery is still very weak compared to the foregoing selloff. A very important level of support/resistance on the monthly chart is the area between 5900 and 6000. Back in 2004 this area acted as resistance and in 2010 and 2011 as support! I want to see a monthly close above 6000 to get bullish.

On the weekly chart you can see slow recovery since August 2011. The SMI just managed to close the gap around 5750. You can also see on the weekly chart the importance of 6000 level in the SMI.

On the daily chart of the SMI I kept an eye on the bearish wedge which has been broken to the downside recently. During the next few weeks chances are high for a further decline. At least a retest of the starting point of the wedge should happen. So my target to the downside is 4700 as long as we stay below 6000 on a weekly basis.

The chart of Nestlé (CH0038863350) is more neutral. After a huge selloff in August Nestlé could recover back into the range from the last two years between 50 and 55. In the middle of this range Nestlé often found support or resistance around 52. That is right there where it closed today. So above 52.40 is room to 54.50 to 55 and otherwise a retest of 50 Francs is very possible.

DAX analysis

The DAX hold once again the very critical support area between 5750 and 5800. Nevertheless higher volume and bad intraday action in the last few hours could be a bad omen. Furthermore the S&P 500 broke below its support at 1226 (50 day moving average) and below the trendline I have shown in the last post.
The RSI of the DAX chart broke its uptrend on October 31st and a few trading days later the DAX itself broke its uptrend. Now the DAX successfully retested the broken trendline and should head lower. Moreover a shoulder-head-shoulder pattern could be formed on the daily chart if the DAX breaks below 5750.
A gap down tomorrow below 5750 and all bets are off. Then I would not expect any action like we saw on November 10th. If we close tomorrow below 5750 we would also have a bearish engulfing pattern on the weekly DAX chart.

The alternative scenario would be a daily close above 6125. Then we could see some kind of year-end-rally.

Still nothing has changed in the DAX 30 and S&P 500

The DAX is still in its range between 6120 and 5750. A break in either way would lead to a bigger move to the up- or downside. Below 5750 my first target is 5490 and then somewhere around the 5000 level. Above 6120 my target is 6400 and then 6600!
I think today or tomorrow a break will occur!

The S&P 500 just closed on a supporting trendline. Around 1226 is the 50 day moving average which could act as support too. At this point I have a bearish bias but I am looking forward to a breakout and that should be traded.

DAX market analysis

The German DAX is stuck in a range between 5750 (5700) and 6080 (6120). A close above that range would give us an upside target around 6400 and then 6600. A daily close below this range would end the DAX to 5500 and later down to 5000. So all in all we just have to wait for a break of this range...
Overall I am still very bearish on the stock market but until year-end I still think a rally could occur. 6600 would be a nice target, but not further than 7000. But do not get me wrong, if we close below 5700 I think a year-end rally would be quite difficult!

At this point intraday 5890 there is still no convincing upside reversal in place, so I think we have not seen the lows of the day.

DAX back to 6400?

The German DAX touched in October the 200 day exponential moving average and sold off hard afterwards. Since then the DAX stabilized between 5800 and 6200. Even tough it is still in this range I think a break to the upside is imminent. To me it does not look like a completed top! At least the 6400 area should be retested maybe in the upcoming week. I am expecting a weak start into the trading week ahead but until Thursday the DAX could rise to 6400. Above that 6600 seems to me like a reasonable level for the DAX to reach in the next few weeks. If we will get a very strong year-end rally the DAX can even rise to 6990 (former level of support). But that should be at least a medium term ceiling for the DAX. At this point I am expecting a huge sell-off in 2012 and I will post if anything changes in that forecast!
I know this is a bold call but I am risking it!

The SPY (ETF on the S&P 500) also consolidated after the recent highs. If the SPY gets up to the highs from October the DAX would be around 6400 and if the SPY would rise to 132 (the declining trendline) the DAX would rise to 6600! These are very key levels in my opinion. As long as 5750 in the DAX and 123 in the SPY hold as support there is no need for shorting the market in the intermediate timeframe!

DAX 6200...

In the DAX 30 there is a gap-support and trendline support at 6200.. From there I expect a recovery over the next few days. Especially with the ES down 16 points before the US market is open the downside should be limited.. Below 6190 the target would be around 6140!

SPY at resistance?!

The S&P 500 gapped up today and the action was very bullish until 3am. I don't want to beat around the bush: my sense is that we could have seen the/a top today!

First of all despite the general view a gap up is a sign of strength I see this gap as an exhaustion gap. After a huge move a gap usually indicates either that the bulls resign (gap-down) or that the bears resign!
Moreover some points are very similar to the action on July 7th.
1. After a big upward movement a gap.
2. Buyers control the market until the final hour of trading.
3. Profit-taking in the final hour.
4. Shooting star on a daily chart.
5. Compare the sentiment readings of the AAII survey. Last time the sentiment was similar to this week's was on July 7th.

S&P Breakout?

Today the S&P 500 finally closed above 1230. Is this a convincing breakout?

I don't think so..
Why? Just take a look at the German DAX:
October 13th 2010: DAX broke out of its trading range; S&P did not but followed some days later.
August 1st 2011 DAX closed below 7000 for a while and S&P was still in its trading range but broke down on the next day.
And now this trading range:
October 4th 2011: S&P broke to new lows while the DAX was 120 points away from its recent lows.
October 21st 2011: S&P broke to new highs while the DAX is 130 points away from a breakout (future 120 points)

Technical Analysis - DAX 30

After the break below 6990 the DAX sold off hard. Between 6300 and 6550 is very good support. Two gaps are still open which could be closed before a much bigger sell-off. Resistance on the way up is definitely 6990. Above that level the chances are pretty good to retest 7400. On the other hand below 6200 there is no bigger support level until 5800. With that high volatility we are talking about much bigger moves. I think it is a little bit scary that the DAX dropped nearly as much in three days as it gained between October 2010 and February 2011.

Nevertheless I think that the lows from today should hold for a few days at least. One reason is if you are counting the downward move from the highs of the year to the low in June as wave A, the bounce back up to 7523 as wave B and the decline since than as wave C, then wave C reached its 1.618 extension. Furthermore the S&P 500 touched its 38.2% retracement from last year's low to this year's high and formed a bullish hammer on high volume today.

Technical Analysis - DAX 30

The DAX closed on the lows of the day so not a very impressive action. Now the gap at 6961 is fully closed. I want to show you the arithmetic chart of the DAX on a daily basis since mid 2008. Since the lows of summer 2009 the DAX formed a nice upward trend. The index nearly reached that trendline which is just below the exponential and simple 200 day moving averages. Former declines during this uptrend always stopped at this trendline and around the 200 day moving averages. So watch out if the DAX breaks below the drawn trendline and afterwards below 6800.

Now I want to show you the chart on a closing basis. This chart shows that the XETRA DAX should not close below 6950. Sometimes the trendline on a closing basis are getting violated before trendlines in candlestick charts do. So this could be a good indication in what direction the DAX will head.

On the weekly chart you can see this trendchannel too but more important are the exponential and simple 50 week moving averages. They provided pretty good support in the past.

Last but not least a chart on a weekly closing basis of the DAX. Here you can see that the DAX should not close below 7145 on a weekly basis to keep the upward channel intact.

Technical Analysis - DAX 30

The DAX 30 gapped up on positive news out of the US but gave up all its gains and is now down 2%. On positive thing I want to mention, the DAX nearly closed the old gap at 6960 and had a high volume sell off. So all in all I think a temporary bottom could be in place. The S&P 500 retested its 200 day moving average and bounced off it and the VIX never went positive during this sell-off. So the market felt some panic but stabilized.
Nevertheless the DAX should close above 7050 but at least above 7000 today. A close below would be bearish in my view.
After such a sell-off it is quite hard to define targets to the upside but there is still the gap at 7389 which could be closed before a steeper correction.
Quick add: in the very short term another test of today's lows could happen but they should hold as support.

Technical Analysis - DAX 30 and EUROSTOXX 50

The DAX 30 struggled during its upward move and sold off yesterday. Today the DAX gapped down and is now on the way to close the gap. In the next few days I am still expecting a move down to at least 6990/7000 and more likely down to the drawn trendchannel around 6940. That move down would finally close the gap at 6960. An overshoot to the downside to 6900 is possible but daily close below this trendline would be very bearish. Be very cautious around the 7000 area because a move below 6980/6990 would definitely hit many stops and 6940 could be reached within minutes.
A move back above 7300 during this week would be impressive and then my favourite scenario would be a retest of the 7500 level. Remember trade small positions because the headline risk is huge. A resolution in the debt talks in US and the markets could surge or on the other side a downgrade of the US and the markets could tank.

The EUROSTOXX 50 does not look as robust as the DAX 30 does. Since August 2009 the EUROSTOXX 50 has been moving sideways between 2500 and 3000. Since summer 2010 the index formed an upward trend which broke in May 2011. In July the EUROSTOXX retested this trend once again and failed. In my opinion the index will retest 2500 and if this level holds even a retest of 3000 is possible. If the EUROSTOXX 50 falls below 2500 a test of the 61.8% retracement around 2270 is imminent.

Technical Analysis - DAX 30 and EUROSTOXX 50

As I mentioned last week I was expecting a pullback. We got a selloff. Nevertheless today the DAX 30 made a nice reversal on high volume like in March. I would have liked an intraday break of 6990 but you have a nice level to of support and a high volume reversal. So at least for the short term I think we could head higher. Very critical is 6990. A break below would hit many stops and the index could even gap intraday.

The EUROSTOXX 50 sold off hard during the last three sessions but found support at 2600. This level has to hold over the next few days. An upside target would be a gap close at 2800.
A very critical level in the S&P 500 Futures is 1294/1295. Watch these levels for defining the trend.

Technical Analysis - DAX 30 and S&P 500

The DAX moved slightly up during the last two days but overall nothing really changed. The daily candles indicate some uncertainty. I am still expecting a move back down to 7320 at least maybe even 7250 before moving up to 7800. My upside target is the upper trendline shown in the chart.

The S&P 500 moved straight up since last week and nearly reached the highs of this year. I think some consolidation is necessary. Support should be around 1330, 1311 and 1294. Any consolidation should not go lower than 1294.

Technical Analysis - DAX 30 and S&P 500

The DAX ran into some resistance around 7440 to 7460. The 76.4% retracement of the forgoing downward move is there and the highs from February. Today's action could be the start of some consolidation. A break above today's highs on a closing basis would be very bullish. Support should be at 7310/7320 and below there 7230/7250.

The S&P 500 reached a very interesting level after that impressive rally. The uptrend from the March 2009 lows on a logarithmic scale is around 1340/1345 so maybe this was just a bearish retest of the broken trendline.

On a shorter timeframe the S&P 500 also reached the 76.4% retracement of the foregoing downtrend. Moreover there is a significant resistance area between 1340/1345 as you can see on the chart below. At this level the S&P 500 has been rejected four times since February. Ideally the S&P 500 will consolidate but does not break below 1294.

Technical Analysis - DAX 30 and S&P 500

The DAX reached last Friday my first target of 7410 and ideally will consolidate over the next few days below 7450 and above 7320 and below that above 7200. Below there a test of 7080 or lower could happen.
Because of a rising upper trendline in the hourly chart the chances of a continuation of this steep rally are very little. Nevertheless a break above 7460 on Monday (adding 30 points per day to this trendline) would send the index probably up to 7600 within a very short period. In the chart below I showed a very stable trend channel since summer 2009. Since 2011 I think the DAX is forming a rising wedge which could indicate the end of this uptrend on a higher timeframe. At this moment I am expecting a last break above the upper wedge trendline which is actually around 7700. I do not have a precisely timeframe for that scenario but I think it should happen in 2011. But that does not mean that after the mentioned last break above the wedge-line the market has to sell off immediately.

The S&P 500 should also find some resistance around 1345 to 1350 after this very impressive rally last week. Very critical for the bulls is the 1294 level. It should definitely hold otherwise I think we could see lower prices than in June. But for now I think there is no need to get involved at these levels if you have missed this move. For sure it depends on your timeframe.

Technical Analysis - DAX 30 and S&P 500

The DAX 30 bounced higher as I mentioned in my last post. Now the index is back at the very critical level of 7320/7325.  A break above 7320 would send the DAX back up to 7400. A break below this week's lows would be very bearish.

Today's close in the S&P 500 is critical and the bulls should lift the index back to the highs around 1310 into the close. I am expecting a test of the 50 and 100 day moving average in the S&P 500 at 1317. The S&P 500 should hold 1294 otherwise another test of the 200 day moving average around 1264 is in the cards.

Market Analysis - DAX 30 and S&P 500

Today's action was obviously negative in the DAX. But as you can see the DAX 30 bounced off the drawn trendline several times and so it did today. For Monday I am expecting a move back down to 7083/7084 and from there a rise to 7200 or higher. If the German index falls below 7075/7065 and this scenario is invalidated. The next levels to the downside would be 7040, 7020, 6990 and below that the gap close and the 200 day moving average at 6960. But as I mentioned until a break below 7065 I am in favour of the upside scenario.

In the S&P 500 nothing has really changed since yesterday although today's session was very weak. During the session the bulls never fought back but the S&P 500 is still above its 200 day moving averages (both simply and exponential). I am still expecting a bounce to the upside for the coming days. I mentioned last week that maybe the bulls have to wait for July until the stock market is able to bounce. Above 1300 the next stop should be somewhere between 1320 and 1345. A break below the 200 day moving averages would probably send the index back down to the March lows around 1248 and below that support should be around 1225 to 1235.

Market Analysis - DAX 30 and S&P 500

After yesterday's action I got much more cautious and today proved me right. The DAX 30 closed down nearly 130 points at 7149. The DAX basically held the 7150 level and has the chance to rise to 7400 in the next few days. This scenario is still intact mainly due to a reversal in the after hours. The news out of Europe/Greece lifted the markets up from its lows.
Tomorrow and over the next few days the DAX must not violate today's lows at 7115 otherwise there is downside potential to 7040 and 6990. Resistance is around 7310 and above that 7400.

The S&P 500 looked very weak intraday but after half of the session stocks got some bids. The S&P 500 touched its trendline back from the March 2009 lows and its 200 day moving average and closed at the highs of the day. Overall today's action was very bullish in my opinion and I think the S&P 500 could easily move back up to at least 1320.

Market Analysis - DAX 30 and S&P 500

Yesterday the DAX 30 broke as expected above 7230 and reached its first resistance level around 7310. The DAX 30 tried several times to break above that level but always failed. I think tomorrow we could see some consolidation. A break above 7310 would give the DAX some room to 7400 to 7410. At least after that level we could see at least a retest of the breakout level around 7230. In the hourly chart the DAX is in an upward trend channel. Trendline resistance is at 7330 and trendline support is around 7160 (both rising). If the DAX 30 breaks below 7130 new lows would be very likely.

The S&P 500 is very likely forming a bigger topping formation. In the shorter time we could easily see prices back above 1300 more precisely I am expecting a move back up to 1325 to 1340. Most of today's trading session was in the favour of the bulls. The S&P 500 consolidated around 1295 but in the last two hours it gave back nearly half of yesterday's gains. That was not very impressive at all. A break below 1275 or 1270 and I think the S&P 500 will test the March lows at 1250. Usually the end of June shows weakness so I think the chances for a bigger bounce to the upside are much better in July.

Market Analysis - DAX 30 and EUROSTOXX 50

The DAX 30 is still in its sideways range between 7030 and 7250. A break above 7245 to 7250 would indicate a rise to 7410 to 7450. A break below 7030 and 6990 would send the index to 6940 the 200 day moving average. At this point I prefer the break to the upside but act quickly and be prepared for any scenario.

The EUROSTOXX 50 looks weaker than the DAX 30. A break below 2690 would be bearish and the next support zone would be around 2650. The index has to break above 2800 to get bullish. Then I think 2870 and above that 2950 is on the horizon.

Market Analysis - DAX 30 and EUROSTOXX 50

DAX and EUROSTOXX 50 have both closed quite ok. So I think the bulls will have a chance to push the indices higher. Just the last few minutes we saw an explosion in the Volatility Indices of the US-Indices which I was looking for. In my opinion we could see a nice rally over the next few days, maybe even weeks. Watch in the S&P 500 cash the 1249 level a daily close below it would be bearish. In the EUROSTOXX 50 today's lows should hold and in the DAX 30 the 6990 level is critical.

Market Analysis - DAX 30 and EUROSTOXX 50

The XETRA DAX 30 is lower today but still forming a bottoming patter. In my opinion the 6990 level is very critical but it would be better if the DAX can hold 7030. Two reasons why I think there is not much downside left in all the western indices are the very bearish sentiment and the pretty extended put-call-ratios. My upside target is at least 7440. The situation would get more critical in the DAX if it would break 6990 but even then you would have to watch the daily closes because just around 6850 is the 50 week moving average which held several times as support.

The EUROSTOXX 50 broke to new lows today. The RSI on the other hand is not forming new lows. So this could be an exhaustion gap but you have to watch today's close. It should close above 2710.

Market Analysis - DAX 30 and EUROSTOXX 50

The German DAX 30 broke above its downtrend line of the consolidation pattern this morning. The recently mentioned gap between 7183 and 7194 is already closed and I think 7300 is on the horizon. Maybe even 7500 points are possible over the next few weeks. My opinion is that the up gap should hold today and even over the next few days. A break back underneath the trendline would be bearish.

The EUROSTOXX 50 also started some sort of relief rally this morning but not as impulsive as the DAX 30 did. It has already broken the lower trendline but I think there is also a second way how you can draw a trendline. In the chart below you can see that this trendline is now around 2800 so we will see. In the short-/medium term I am positive but take a close look at today's gaps in both indices.

Market Analysis - DAX 30, NIKKEI 225 and IBEX 35

Today I will take a quick look at the XETRA DAX 30, NIKKEI 225 and IBEX 35.

To me it seems that the German DAX 30 is still consolidating before moving back higher. My upside target is around the highs of February (7400). There it will be critical to take out the recent highs around 7600. That will be quite difficult because my opinion is that we are already near a top. But now back to the shorter term picture. There is still a gap open between 7184 and 7193 which I expect to get closed. Right there is also the declining trendline. For sure the DAX 30 could test before a gap close the 50 week moving average around 6850 but the declining line from the February highs to the March/April high held so far as support. If you are short the DAX 30 be aware that above 7200 a fast short-squeeze could occur up to 7300.

The NIKKEI 225 has build a more sideways than downward channel since mid 2009. I am not expecting a near term breakout of this channel. In the short term the recent lows around 9350 must hold as support otherwise a retest of the Fukushima lows is in the cards. On the other hand a break above 9750 will send the index to 10000 and afterwards the upper trendline will get in focus.

The Spanish IBEX 35 is an underperformer compared to the German DAX 30. The index is forming a triangle since 2010 and on a logarithmic scale the IBEX 35 already broke to the downside. Shorter term I want to emphasize the 9800 level. It was resistance many times in 2008 and 2009 and should act as support. Since mid 2010 the 11000 level acted as resistance. I will watch a break under or above these levels for a trading opportunity.

Please feel free to leave any comments or send me an email.