The DAX has pulled back in trading today off the back of comments from the ECB and the U.S. Federal Reserve. The ECB’s Governing Council approved a proposal by the central bank’s supervisory arm to legally prevent Greece’s lenders from buying any more treasury bills. Banks were said to have been banned from boosting short-term government debt holdings. Greek banks rely on almost 70 billion euros of emergency funding to cover a financing shortfall exacerbated by deposit withdrawals – some €1.5 billion last week alone.
Meanwhile in America, the President of the Chicago Fed, Charles Evans, said today that there was no compelling reason for the central bank to tighten and it should wait until 2016 to raise rates. As a result, the Euro has started moving back up, putting downward pressure on the DAX. This move was further aided by investors growing appetite in Euro confidence off the back of a stronger than expected German IFO figure. Results came out at 107.9 vs a previous read of 106.8.
Looking at the Hourly chart below, one can see the DAX is once again below it’s 200 moving average (green line in the chart below). Ordinarily, this would be a bearish indicator. However, the market has been non-trending for the past week, rotating over and below the 200 MA. What seemed like the start of a bear market last week, found strong resistance from the bulls at the 11850 level.
(click to enlarge)
When looking at the 4 Hourly chart below, one can also see the bullish uptrend in place. Price is still within the channel which has been in place since the ECB announced their QE program at the end of January. When observed on closer inspection, you will notice the bottom trendline has been tested on four occasions since. On each test, price has quickly rotated to the upside. This further cements my view on not going short this market, at least until price closes and holds below the bottom trendline.
(click to enlarge)
CONCLUSION – BULLISH
The market is unquestionably bearish intraday, when observing the Hourly or 5 minute timeframe. However, being that the Daily and 4 hourly timeframes are still in an uptrend, bulls will be looking for value, buying the dips. So any shorting opportunities could be fruitless endeavours and should only be traded by seasoned traders, as the long-term trend prevails.
For bulls, buying opportunities reside at the 11900 and 11850 levels. For the more risk averse trader, wait for price to close back above its Hourly 200 MA (currently at 11955) and form a few bars before entering the market.
For bears, shorting opportunities reside in the current 38.2 – 61.8% Fib retracement area (move as appropriate) of todays move down so far from 12021 – 11898.
(click to enlarge)
Bearish targets :-
- 11864 (Extension in Daily trading range – 187 pips average last 22 trading days)
- 11833 (Daily S1 Pivot)
- 11795 (Yesterday’s low)
Bullish targets :-
- 12088 (High from last friday & close to extension is daily trading range at 12085)
- 12170 (Daily R2 Pivot)
- 12222 (All time high)