DAX Technical Outlook: Meltdown Risk Rising

Technical Analysis

DAX Technical Highlights:

  • DAX bearish price sequence keeps shorts well in play
  • U.S. markets moving closer to the edge
  • Strong support levels hard to come by

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DAX bearish price sequence keeps shorts well in play

The DAX made a lower-low on Monday within the confines of a maturing bearish channel dating back to the early-part of February. The price sequence is marked by a series of clear lower-lows and lower-highs, and as long as the index stays below the upper parallel the outlook remains broadly bearish and the weakening price action could soon result in a swift move lower.

U.S. markets moving closer to the edge

The U.S. market, which has been the ‘strongest’, is looking quite vulnerable as the Feb 2016 trend-line and 200-day MA in the S&P 500 are coming under assault again. As said in yesterday’s S&P 500 commentary, that important confluence of support may not last long. And if it doesn’t…

With European postured more poorly than the U.S., should we start seeing equities swoon overseas, Europe and everyone else (Asia, etc.) will too. We have yet to see a full risk-off situation yet where all asset classes fully participate, but look for currencies, commodities, and other markets to participate should global stocks fall apart in earnest.

Strong support levels hard to come by

Getting back to the DAX, specifically, support at 11726 is about to come under fire again shortly. On a move to fresh lows, the lower parallel isn’t seen as holding for much longer. There is minor support at 11428, but nothing substantial until a trend-line extending higher from 2011, which doesn’t arrive for a solid 1000 points from current levels.

This doesn’t mean the market will decline to that point in one clip, but the DAX is trading in dangerous territory where worthy levels of support aren’t highly visible. To turn the picture bullish, a lot of work will need to be done from current levels. The next time we turn bullish might not be until we’ve seen a capitulation-style sell-off marking a bottoming-type event.

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DAX Daily Chart

DAX daily price chart, bearish channel could soon turn into a swoon

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—Written by Paul Robinson, Market Analyst

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DailyFX – Technical Analysis

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