How FTSE 100 and German index might behave during market turmoil

Our chartist’s call on the German Dax index has been proved correct. Here’s what might happen next.

Life’s a funny old thing. When we last reviewed Germany back in October, we gave criteria defining 13,650 as a major point of interest for the index, something the market achieved and bettered during February. 

The odd thing, when we give these secondary targets, we tend to anticipate a bit of hesitation at the price level, generally some volatility or stutters.

• Analyst not optimistic about German index

The Dax index, of course, paid lip service to the concept of hesitation, choosing instead to fall by 1,200 points over three sessions. Some say it was something to do with pandemic fears and nothing at all to do with our 13,650 level.

Source: Trends and Targets      Past performance is not a guide to future performance

In reality, our price levels generally justify a little volatility and (unless some positive or negative news makes itself known) the volatility will be fairly minor. We saw this yesterday with the FTSE 100, as our initial target level was 6,999 points. 

As the chart below highlights, the index hit our initial target, bounced around above and below for a while, then on the third break upward, continued to our secondary target. This tends to be the important thing with price levels. Mostly, they pass virtually unnoticed unless someone throws a cat among the pigeons.

Source: Trends and Targets      Past performance is not a guide to future performance

Unfortunately, the Dax found itself primed for a ruddy great cat incident!

The situation with Germany is now a little strange. If we concentrate on reversal potentials, it appears weakness next below 12,368 should attack a bottom of 12,152 and hopefully generate a bounce. 

We actually have some doubts, thanks to the effort employed on Wednesday to force a bounce. It almost felt like “they” didn’t want the market to fall further.

Instead, the immediate situation suggests recovery above 12,850 should bring a visit to 13,034 next. If bettered, we’d regard it entering a cycle back up to 13,650 as secondary again, utterly confusing us, why is this level so important?

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, or interactive investor will be responsible for any losses that may be incurred as a result of following a trading idea.