The last 24 hours have been very turbulent for stock markets across the world. Yesterday Indices collapsed after investors were trying to digest the mixed messages from the Fed the prior day in relation to the timing of raising Interest rates. Then later in the day, the Greek Prime Minister resigned just weeks after securing a new €86 Billion bailout deal for Greece. The country will have to hold a snap election to vote in a new leader, most likely on the 20th September. This short-term political uncertainty sent jitters throughout global equity markets, causing prices to plummet further – see article here
When investors thought things couldn’t get any worse, data released in the early hours of today during the Asian session, showed much weaker than expected data out of China. The Caixin Manufacturing PMI is a broad indicator of over 400 businesses in China monitoring the level of business, employment, production, etc. The number came in at 47.1, well under forecasts of 47.7, slowing to the fastest pace since the Great Recession of 2009. This news further exacerbated the sell-off in equity markets, with the Shanghai Composite dropping a further 4%, bringing the weekly total loss for the Index to 11%. The Hong Kong Hang Seng Index and Japanese Nikkei are down 7.4% and 5.2% respectively – see article here
The DAX has dropped 13% over the last fortnight, travelling from 11620 to 10054 in the early hours of this morning. The 10054 level saw Bulls step in with confidence, finding it easy to define risk, as this was the Weekly 100 moving average (blue line in the chart below)
(click to enlarge)
Looking at the Hourly chart of the DAX below, I hope some of my subscribers got in on my short position call of 10651 in trading yesterday (article here). The market found some resistance at the Weekly 50% retracement level of 10378 but continued its slide lower earlier today after a weak Chinese number. When the market finally found firm support at the Weekly 100 MA, Bulls stepped into the market and drove the price higher. Resistance came around the 10225 level, which is the point the DAX was at when the ECB announced QE. As I write, price is currently bouncing around the 10378 level once again after stronger than expected German and European Manufacturing data released this morning has helped bolster price.
(click to enlarge)
CONCLUSION – NEUTRAL
Where price will travel from here is anyone’s guess. Even though the Weekly 100 MA held the Bears from pushing the market further down, the move was fast and would no doubt bounce higher as value Bulls stepped in, along with profit taking. The political uncertainty surrounding Greece will loom for the next month or so, not to mention the uncertainty of China’s slowdown and the timing of the Fed’s Interest Rate hike. All of these negative ingredients are now in the bubbling and volatile pot that is global stock markets. So for the time being one can only go off technicals.
For Bulls, levels to lean against where risk can easily be defined are 10054, the 10225 level and into the 5 minute 100 & 200 MAs. Resistance is up ahead with the 10616/10592 and Hourly 100 MA.
For Bears, levels to lean against are the Hourly 100 MA, 10616/10592 zone or a break below the 100 MA on the 5 minute chart. Risk averse traders will be entering on a break of 10054.
Bearish targets :-
- 10225
- 10122 (Daily S1 Pivot)
- 10054 (Daily low)
Bullish targets :-
- 10437 (Daily high)
- 10551 (Daily R1 Pivot)
- 10616/10592 zone