First let's take a look at the XETRA DAX on a weekly chart. Here you can see despite the recent decline the DAX is still in an uptrend. Both the 50 week EMA and the 50 week SMA are around 6800 and as I pointed out in the chart below these moving averages usually hold as support or resistance. Furthermore the trendline of the upward channel is just around 6800.
On a daily chart the situation looks similar. The 200 day moving averages are around 6900 and both the Stochastic and the RSI are showing some positive divergences. For next week I am expecting a last shakeout to the downside before moving back up to at least 7400. For now I think an ending diagonal is in the cards which maybe pushes the DAX up to 7800. The last move up should overshoot to the upside above the upper trendline. If we are testing 6800 to 6900 during the first two days next week I am still expecting a weekly close above 7040. If we are closing next week below 6800 I am rethinking my bullish scenario.
The next chart shows the EUROSTOXX 50 which broke out of its channel to the downside. As I mentioned in one of my last few posts I think the EUROSTOXX is testing the 2300 area during the next few months but for now the index is still in a big sideways correction. In the short term the EUROSTOXX 50 is oversold and should retest 2800. A break below 2700 on a closing basis would indicate a move back down to 2600.
The FTSE 100 is still above its trendline and fighting with its 200 day moving averages. If the FTSE cannot hold this trendline a move back down to 5600 is very realistic. A break above 6100 would give us an upside target around 6400 and a break below 5520 will probably send the FTSE 100 back down to 5000. I am not expecting a breakout of this range between now and the end of August but be aware of these levels.
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