Index Trading - Eurostoxx 50, DAX, ATX and SMI

The past two days nothing really happened.
The XETRA DAX formed two dojis on Monday and Tuesday and also today the daily pattern is indication some indecision. I am expecting a move back down at least to 6900 maybe also back down to the lower trendline around 6800. If this trendline does not hold the DAX will maybe retest 6350.

The EUROSTOXX 50 looks a little bit extended and maybe it is forming a shorter term top around 2850 to 2860. The 61.8% retracement of the last move up is around 2780. There is also another Fibonacci level around this level and I think we will retest this maybe even before Christmas.

The ATX stopped at a rising trendline which started at the high from October '09 and touched the high from April. The ATX looks overbought and I think a move back to 2700 is very reasonable.

The SMI is still forming a potential bear flag which looks similar to the action in the EUROSTOXX 50, but the EUROSTOXX 50 is consolidating in form of a bearish wedge. Today the SMI has formed a reversal candlestick and if the rising trendline around 6350 breaks we could see a fast move down to 5940.

Weekend Market Analysis - DAX, EUROSTOXX 50 and S&P 500

This was certainly a very interesting week on the stock markets. As always I want to take a look at the XETRA DAX and the EUROSTOXX 50 and also at one US-Index.
First the DAX on a weekly candlestick chart. As you can see the candlestick of the past week has a very small body and also the weekly range was just 120 points. That means that the range was less than 2%. Also on the weekly chart you can identify a rising trendline which limited the upside since 2009. I personally do not expect a break of that trendline and so a acceleration of the uptrend. Moreover both the RSI and the Williams% are showing overbought conditions. Nonetheless I would never trade such indicators itself because just price action pays you.
Moreover the 76.4% retracement from the high in 2007 to the low in 2009 is at 7075 points which is obviously not very well charted.

The daily chart of the DAX shows a nice rising trend channel since September. The upper trendline is around 7175 and the lower trendline just below 6800. As you can see the last highs of this week did not touch the upper trendline which is a little bit worrisome. In the medium to longer term I am still expecting a move back to 6350. Can the DAX reach the 7200 level before that? Certainly! Nevertheless I think for the long-term uptrend a retest of the breakout level would be very healthy. Other signs are the recently mentioned sentiment surveys. Short-term trader should play attention to the inside candlestick formed on Friday. In addition to the bearish engulfing candlestick on Thursday a break in either direction will be followed by further buying/selling.

The EUROSTOXX 50 seems also a little bit extended to the upside and is still under the resistance level of 2850. Nothing really changed on Friday. The index is in my opinion neutral but extended.

Now let's take a look at the 5-year weekly chart of the S&P 500. The downtrend since 2007 clearly broke in 2010. The index run into resistance around 1220 and retested the trendline. Since September the S&P had a nice bounce back up to resistance. This week the index broke through on a daily and a weekly basis. Nevertheless there is further resistance around 1250 and later around 1300.
In late 2009 and beginning of 2010 the RSI showed some divergences on the weekly chart which looks similar what the RSI on the daily chart of the DAX is forming nowadays. As you can see at the S&P divergences are just a warning sign and not a trading signal.

After another 5 to 10 points to the upside we could see some profit taking. Moreover when the S&P 500 reaches 1250 I think the DJIA will reach the former highs from November around 11450 again. So maybe a little bit of a correction could occur nonetheless the S&P 500 broke to new highs. Further the DJIA was forming a candlestick of indecision on the weekly chart.

Watch out what China does over the weekend because this will definitely have strong influence on the stock markets around the world.

Index Trading - Eurostoxx 50, DAX, S&P 500

In my opinion nothing really changed during the last few days. The EUROSTOXX 50 was forming a doji candlestick in yesterday's session. Moreover it is just around resistance around 2850. In the hourly chart the EUROSTOXX 50 is showing a bearish wedge which should break in one direction either today or on Monday. After this run I would bet that the break would happen to the downside but who knows. The bearish divergence on the RSI is still intact so if you are long protect your profits and watch out.

The XETRA DAX has formed a pattern of indecision on Tuesday followed by a bearish engulfing pattern yesterday on heavier volume. As I mentioned in former posts I am expecting a move to either 6800 or even 6650. Nevertheless you must have a proper money management and a stop above the recent highs if you want to trade that.

The S&P 500 is looking much better. If it either takes out Tuesday's highs or closes today (weekly) at least at yesterday's level I would get bullish on the US-Indices. Nevertheless also the US-Indices are looking quite extended to the upside and with such a bullish sentiment and the low Volatility-Index a move back to 1200 in the S&P 500 seems quite reasonable. If the S&P 500 closes at 1226 or below today the action would look like false breakout and the weekly candlestick would form a shooting star.

Market Analysis - DAX, EUROSTOXX 50 and NASDAQ 100

The action yesterday was not bullish at all. When the US-Indices opened their regular trading session everything looked like a breakout. But as I mentioned in my last post the intraday action is critical as well. Intraday all major US-Indices sold off pretty hard. They tried to bounce in the middle of their trading session but failed and closed at their lows and even more important back in their trading range, under their breakout level. Besides that the DJIA could not take out the November highs. In the weekend post I mentioned a rising trendline in the hourly chart of the SPY. The SPY broke above this trendline yesterday but during the last two hours of trading yesterday it fell back below it.

The German DAX also made another reversal or at least another candlestick pattern where you should be cautious. I am expecting at least a retest of the 6900 level and if it holds it could certainly go up further into year-end. Nevertheless I think the DAX will retest sooner or later the breakout level around 6350 at the latest next year.

The EUROSTOXX 50 also made a candlestick pattern which looks like the one of November 30th and from there on it bounced. Moreover the index did not close significant above the key 2800 level yesterday.

I do not recommend to short here but with the highs from yesterday you have some well defined stops with a nice reward to risk ratio. I personally do not like the idea to get long up here after this nasty intraday action yesterday. If you are already long you should protect your profits.

State of the Market - Indices

The overall tape looks very bullish! The EUROSTOXX 50 managed to get back above the key 2800 retracement level so the next target is around 2900!
Also the US-Indices are showing strength (Futures) and everything looks like a breakout. One very important thing has to be added, the US-Indices must close above the breakout level.
At the S&P 500 this is around 1228. Even better would be a nice intraday action with a steadily uptrend throughout the day.