Momentum of new Bear markets forming kicked into another gear during today’s Asian session which saw stock prices in China slide with the Shanghai Composite down 2.8%. Last week a Chinese securities regulator said the Government funds were planning to take a back seat with less intervention in the stock market and allow investors to play a bigger part in determining future price. The contagion of fear spread with the Japanese Nikkei and South Korea’s Kospi both down 1.5% and 1.3% respectively. However it is not just the lack of Government purchases, but also capital outflows causing the rout. Since the beginning of last week, the Yuan has devalued almost 5% causing various investors to pull their money out of Asian equity markets amongst this unstable economic climate – see article here
Later today during the U.S. session at 19:00 GMT, investors eagerly await the minutes from the Fed’s July FOMC meeting. Investors and traders alike will be looking to see if there any more clues as to the timing of a future Interest rate hike by the Fed in September.
Looking at the Hourly chart of the DAX below, you will note the market held against the key 10892/10856 zone in trading yesterday. This floor has now been broken when Frankfurt opened earlier this morning due to the slide in Asian equity markets overnight.
(click to enlarge)
CONCLUSION – BEARISH
The DAX closed below the Daily 200 MA for a second consecutive day yesterday confirming it’s Bear market status.
For Bulls, there is much work to do. Price needs to reclaim the 10892 for starters, but ideally the Hourly 100 moving average (blue line in the chart above) which comes in around the Daily 200 MA at 11,007, before this slide in price shows signs of recovery. Risk averse traders will be entering after the Hourly 200 MA (green line in the chart above) has been reclaimed.
For Bears, the market has moved 201 pips today with the average range for the last 22 trading days coming in at 204, so moves lower from here could be limited with the FOMC minutes out later. Also the 10750 area is the where the Daily S3 Pivot and Weekly S1 Pivot reside creating a strong floor for Bulls. However, if today’s lows are taken out look for Bullish support at 10651 which are the July lows and stronger resistance into 10616/10592 zone. Shorting opportunities with defined risk are into the 10892/10856 zone or on pullbacks into the 100 & 200 MAs on the 5 minute chart.
Bearish targets :-
- 10732 (Daily low)
- 10651 (July lows)
- 10616/10592 zone
Bullish targets :-
- 10856 (Bottom end of zone + Daily S1 Pivot 10863)
- 10934 (Daily high + Daily Pivot 10928)
- Hourly 100 MA