Happy St. Patricks Day to everyone in Ireland and the Irish diaspora worldwide!
The DAX had another mammoth session yesterday, soaring 314 pips to all new highs through the 12200 level, finally topping out at 12221. The market started to drop off during the London session, consolidated overnight in Asian trading, before continuing its drift lower this morning when the European bourses opened.
The German ZEW report was released earlier today. The ZEW Economic Sentiment Index gauges the six month economic outlook. It came in at 54.8, well under expectations of 58.2. Needless to say the DAX remained bearish on the day, tumbling over 200 pips to a low of 11966. This comes in just under strong report of 11975 which was Friday’s high and a level for buyers to lean against as mentioned in yesterday’s article here – ( http://theshielreport.com/2015/03/16/dax-intraday-levels-16th-march/).
The DAX is still experiencing selling pressure on any attempts to move higher intraday. This is due to a combination of profit taking from yesterdays move up and the Euro strengthening. The Euro rose against the dollar in trading yesterday because of weak data out of the U.S. , with manufacturing, industrial output and housing data numbers all lower than expected.
All eyes will be on the Fed over the next two days – with particular focus on the word ‘patience’ and whether or not it will be dropped from the central bank’s manifesto. If so, then Interest Rates will rise but will the Dollar Index follow suit? It’s meteoric rise over the last 6 months has seen it gaining 20% against most of the major currencies .
Or, have investors already priced this in? Time will tell within the next 48 hours which way the market wants to go.
Looking at the Hourly chart below, despite this morning’s sharp move lower, the DAX remains a stalwart amongst its European Index neighbours. It still has not breached its 100 moving average (blue line in the chart below), which may be tested at some point today. Below that lies a cluster of support at 11846-11858 which was once a big barrier of resistance in last weeks trading.
(click to enlarge)
CONCLUSION – NEUTRAL
It would be wise to remain with cash on the sidelines until Thursday after all news from the Fed has been digested by the trading world.
If one is compelled to quench their speculative urges in trading today, the bias is currently pointing to the downside. After moving sharply lower and bouncing off Friday’s highs, the market is once again rolling over and attempting another attack on the 11975 level. This will be a key level to hold for the bulls intraday, as a break through this could see further selling pressure towards the 11850 zone of support.
(click to enlarge)
Bearish targets :-
- Hourly 100 MA (currently 11900 at time of writing)
- 11900
- 11850 (last weeks resistance highs – now support)
Bullish targets :-
- 12197 (today’s high)
- 12221 (yesterday’s high)
- 12300 (also near Daily R1 Pivot 12292)