U.S. equity markets rose on Monday as expectations of the first U.S. interest rate increase since June 2006 continue to cool due to Friday’s surprisingly weak monthly jobs report. As mentioned in last Thursday’s article , the Federal Reserve is still data-dependent and any weakness in the economic data is equal to the presence of cheap money.
Markets were further bolstered off the back of comments made by Greek finance minister Yanis Varoufakis on Sunday who “intends to meet all obligations to all its creditors, ad infinitum.” Varoufakis pledged to meet this week’s upcoming 440 million-euro IMF payment on Thursday, easing earlier concerns that the government was to prioritize wages and pension payments over the repayment.
Looking at the Hourly chart below, after a sharp decline on Friday due to weaker than expected NFP data out of the U.S., one can see the 11850 area (marked yellow) has once again held as support for the bulls. It went on to reclaim the Hourly 200 & 100 moving averages (green & blue lines), and has so far stayed above these levels. The market gapped up this morning when European bourses opened and is now attacking the highs set last week as I type.
(click to enlarge)
CONCLUSION – BULLISH
For bulls, price needs to take out the high from last week at 12122 and then onwards to the 12200/12220 zone. There is plenty of room to roam to the upside today as the DAX has only travelled 128 pips compared to the average over the last 22 trading days – 211 pips. But keep in mind the market has gapped up in today’s trading, and gaps do like to be filled. This area comes in at 12035 -12006 (see 5 min chart below). Buying breakouts of prior highs will be a familiar strategy to many, and for the more risk averse buying dips is more advisable. These areas would be on any pullbacks into today’s gap and below that to buy against the Hourly 100 MA.
For bears, tight stops will need to be used at key levels. The high from last week at 12122, the 12200 level or a break below the Hourly 200 MA.
(click to enlarge)
Bearish targets :-
- 12006
- 11973 (Hourly 100 MA)
- 11910 (extension in daily range) & close to Daily S1 Pivot of 11908
Bullish targets :-
- 12122 (last week’s high) & close to Daily R2 Pivot of 12127
- 12204 (extension of daily range)
- 12222 (all time high) & close to Daily R3 Pivot of 12226