Some global growth concerns were present earlier on in the trading day throughout the Asian session when the data out of China was released. China Manufacturing Purchasing Managers’ Index (PMI), which is a helpful barometer of global demand, the July release dropped to 48.2 below economists’ estimate for a reading of 49.7. It was the fifth straight month below 50, the level which separates contraction from expansion – see full article here
Meanwhile in Europe, a whole host of PMI data was released :-
- France – 49.6 vs expectations of 50.7
- Germany – 51.5 vs expectations of 51.9
- Eurozone – 52.2 vs expectations of 52.5
Despite the glut of weaker than expected data, European equity markets are holding their own today with the CAC, FTSE and DAX all up on the day. Markets seem undeterred by the prospects of weak data as the ECB trundles on with its massive QE program running until September next year, possibly longer if data remains weak.
Looking at the Hourly chart of the DAX below, one can see the market is currently in a Bearish pattern with price firmly below its 100 & 200 moving averages (blue & green lines in the chart below). Yesterday, traders sought push the market higher but to no avail as the Hourly 200 MA kept a lid on the price. In trading today, the advance on price moving higher was once again thwarted this time by a downwards trendline in place since the market has been selling off at the beginning of the week.
(click to enlarge)
CONCLUSION – NEUTRAL
For Bulls, the downwards trendline needs to be taken out, this price comes in at 11545 which was also a barrier of resistance in trading yesterday. Above that, Bulls face a myriad of resistance, the 38.2% retracement level – 11575 (Monday high 11805 to yesterday’s low 11433), the 100 MA on the Daily chart – 11597, the 11606/11595 zone, the Hourly 100 & 200 MA’s, 50% retracement at 11619 and finally the week’s high at 11625. For risk averse investors the 11625 level needs to be taken out before entering into the market. For intraday Bulls buying pullbacks into the 100 & 200 MA’s on the 5min chart and into the 11467/11460 zone.
For Bears, shorting against the aforementioned Bull resistance levels will be the most sensible play for minimising risk. For risk averse investors the 11415 level needs to be taken out before stepping into the marketplace.
Bearish targets :-
- 11433 (Yesterday’s low)
- 11394 (Daily S1 Pivot)
- 11302 (Extension of Daily range – 22 day avg. is 242 pips)
Bullish targets :-
- 11573
- 11625 (Yesterday’s high)
- 11682 (Extension of Daily range)