The DAX has continued to slide lower along with several other European equity markets in trading today. On Friday, Greece did not pay the first of four installments due to the IMF this month. Instead, they are deferring all payments into one lump sum at the end of the month. Even some senior European officials who are considered allies to Prime Minister Alexis Tsipras have become exasperated with the Greece debacle, namely European Commission President Jean-Claude Juncker. Juncker ‘accused Tsipras of distorting proposals by international creditors for a cash-for-reform agreement.’ However, some of the intransigent demands from the creditors are viewed as a little callous from the Greek side of the fence – such as a demand to scrap an income supplement for the poorest pensioners. Finance Minister Yanis Varoufakis also spoke out stating “Greater austerity is being demanded from an economy that is on its knees, owing to the heftiest dose of austerity any country has ever had to endure in peacetime,” – see full article here
The DAX also slipped lower this morning off news out of Germany. The country’s largest lender, Deutsche Bank has appointed a new CEO John Cryan just a few weeks after Anshu Jain was given the reigns to turn the bank around and help restore its tarnished image of alleged money laundering and manipulation of interest rates – see full article here
So where to here from the DAX? Let’s look at a view different timeframes to help garner an accurate picture of the overall investor sentiment in the market.
Looking at the Daily chart of the DAX below, one can see price has broken through the 100 moving average (blue line) and has breached the 11316 level. The 11316 is the 50% retracement in price from when the ECB announced their €1.1 trillion QE program back in late-January to the highs back in April. If price continues to fall in the coming days/weeks, expect to see a buyers step in at the 11058 level – the 61.8% retracement level.
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Next up is also a Daily chart of the DAX, but this time zoomed out to incorporate the lows from last October and January this year. I have drawn Fibonacci Levels from each low to the high in April. This brings the 10892/10857 zone into focus should the 11018/10986 zone be broken in the coming days/weeks.
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Below is a snapshot highlighting a 4 hr chart of the DAX. Notice the downwards red trendline. This has been on my chart since the beginning of April connecting the recent highs of the time. This trendline was broken in mid-May, and price bounced off this area on a retest in this morning’s session.
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Finally, we we have a snapshot showing the Hourly chart of the DAX. Note how the 11193/11174 zone (marked in yellow), which was support for the bulls since last Thursday, was finally broken in this morning’s session.
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CONCLUSION – BEARISH
My long term view is certainly bullish as price is well above it’s 200 day moving average, however, the intraday charts cannot be ignored. Pessimism over the future of Greece’s involvement within the Euro as a result of a possible default on its debts to its creditors still lingers in the air. The 11193/11174 will be a focus of interest for bulls & bears alike today along with the downwards trendline as aforementioned.
For bulls, price has a lot to do. First the 11193/11174 zone needs to be cleared. Next, the Hourly 100 MA (blue line in the chart above), price has not managed to close above this level since the end of May. Then finally the Hourly 200 MA (green line) needs to be cleared, where risk averse investors will step in with defined risk against the Hourly 200 MA. If price breaks the downwards trendline today, the next zones with defined risk for bulls to lean against are the 11018/10986 & 10892/10857 areas.
For bears, price needs to stay below the 11193/11174 zone today, with the Hourly 100 MA being the line in the sand – intraday. The target for bears today is to break the downwards trendline, if successful, expect profit taking into 11018.
Bearish targets :-
- 11103 (Daily low + Trendline target)
- 11018 (Key zone)
- 10999 (Extension of Daily range – 22 day avg. 221 pips + close to Daily S3 Pivot)
Bullish targets :-
- 11221 (Daily high)
- Hourly 100 MA
- 11325 (Extension of Daily range + Key zone)