The DAX is consolidating so far in trading today after it’s huge surge yesterday, rocketing from 11780 up to 12114. Doubts over the growth of the U.S. economy from yesterday’s data has certainly put a dampner on things. Data on Wednesday showed U.S. private employers added the smallest number of workers in more than a year in March with the ADP number coming in at 189,000 jobs added. Much lower than the forecast of 225,000 and lower than the previous reading of 214,000. This coupled with factory activity hitting a near two-year low, caused U.S. markets to slide yesterday. Some economists are highlighting the impact of a harsh winter, weaker global demand and a strong dollar isn’t favourable for U.S. exporters which ultimately effects the employment statistics. Traders are reluctant to chase the market higher today as the minutes from the ECB’s March meeting will be out at 12:30 GMT. But even after that release, markets will be anxious ahead of the U.S. Nonfarm Payrolls coming tomorrow when most U.S. & European bourses will be closed.
All negative data aside however, when looking from another viewpoint this could be a bullish sign for markets, which are at present, heavily fuelled by Central Bank intervention – namely Quantitative Easing and Interest rates. Markets know the U.S. Federal Reserve Chair Janet Yellen has already stated that a rise in interest rates is data dependent. Meaning if data is constantly coming out weaker than expected, there will be no sign of rate hikes soon, leading to further inflows of capital into the Equity markets. Sentiment was recently also lifted by prospects of further easing from the Bank of Japan, after the second part of the central bank’s Tankan survey showed that large companies see inflation at 1.6% in 5yrs, well off the BoJ’s 2% target.
Looking at the Hourly chart below, one can see how the 100 & 200 moving averages (blue & green lines) have so far held price from closing below since breaking back above in yesterday’s trading.
(click to enlarge)
CONCLUSION – BULLISH
The viewpoint is much the same as yesterday – wait for pullback in price to key levels. Looking at the 5 minute chart below, many of yesterday’s buy points remain intact. However, the 100 & 200 MA’s are keeping price from pushing higher, so be wary of that.
For bulls, it would be wise to wait for pull backs into 11947, 19000 and 11850 with tight stops. For the risk averse investor, only buy with price holding above the Hourly 200 MA.
For bears, shorting pullbacks into the 100 & 200 MA’s on the 5 min chart. If price starts to move above those two levels, it may not look back – so be wary.
(click to enlarge)
Bearish targets :-
- 11938 (Hourly 200 MA)
- 11900
- 11837 (Extension in daily range – 214 pips average last 22 trading days & Daily S1 Pivot at 11847)
Bullish targets :-
- 12122 (High from Tuesday)
- 12155 (Extension in daily range)
- 12176 (Daily R1 Pivot)