Indices – 28th November 2010

First I want to take a look at the German DAX 30. As you can see here the German market had a nice rebound since the March ’09 lows. Moreover you can see that the Fibonacci Retracement levels were working pretty well. On the weekly chart below the next overhead resistance is around the 7200 level.

 

Compared to the Eurostoxx 50 the DAX shows some relative strength, especially since Europe’s solvency crisis. 

 

The next chart is showing the DAX in a shorter timeframe with a rising trend channel. At the moment the lower trendline is around 6000 points and the upper trendline is around 6950. Furthermore the RSI is showing a negative divergence because the price is rising while the RSI is declining. Usually such a divergence is indicating that a correction will occur.

Nevertheless I would not short such a strong index before he shows some weakness. For me the index first has to gap above the upper trendline which is shown in chart number three. And if that gap up is combined with a doij candlestick, then I am looking to short the DAX if the breakout could not hold support of the upper trendline. The other short possibility is if the trend since mid-October in chart number 4 breaks. To short the DAX is nowadays very dangerous. In my opinion the Eurostoxx 50 would be the better short candidate.

 

Now let’s take a look at the Eurostoxx 50.

During the last year the index is trading more or less sideways, but the next chart shows why the index could be a potential short candidate.

 

 

This chart shows that the index is forming a bearish wedge and if it breaks it could go down pretty fast. As you can see the RSI showed a few weeks ago a bearish divergence before the Eurostoxx 50 declined.

In the very short term the index formed a bullish hammer on Friday. This could be a great swing trade on the long side with a well defined stop in form of the rising trendline.

The US-indices are also at interesting levels. During the last week and a half the Dow Jones Industrial and the S&P 500 were trading in a very tight range. In the DJIA the levels to watch are around 11200 and 11000 and in the S&P 500 at 1200 and 1172. If one of these levels breaks the indices will move further down or up in the direction of the break.

 

The next support on the downside could be around 10700 in the DJIA and 1150 in the S&P. On the upside the old highs would be resistance.

So that’s it for today! Good luck and take care. 

A quick reminder:

Everything posted at this blog is for educational purposes only and should never be conceived as recommendation for buying and selling anything. You must do your own research.