Where's the DAX heading next?
10th September 2018 10:25
by Alistair Strang from Trends and Targets
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It's been a bumpy ride for Germany's DAX index so far this year. Technical analyst Alistair Strang analyses Frankfurt's next move on the charts.
DAX big picture (DBI:DAX)
Is the DAX heading to 7,500? For five years, we've started each week reviewing the FTSE big picture, then ended each week looking at the FTSE near- term.
To change this, we're opting to review whatever index, commodity or forex takes our interest at the start of a week.
This week, the DAX seems to be worth rather more than a casual glance!
It's probably worth mentioning, unless you have massive pockets, none of the trades which follow will hold any attraction for near-term spread betting.
Instead, we're hoping to give an indication of the market’s real direction, pointing out what shall be required to convince us our thoughts on direction are wrong.
And for now, the DAX appears a pretty dangerous place to be, if defending a long position.
The headline number to mention is 11,120 points. The immediate cycle calculates with this number acting like a magnet to the index, the value requiring above 12,500 simply to regain the prior trend.
With the market closing last week at 11,959 points, it's a pretty hefty stop position despite the potential of a further 800 point drop.
Wintery outlook
In addition and perhaps of greater importance, there's a massive issue should 11,120 break as our secondary ambition calculates at 10,314 points.
This will break the uptrend since 2011 and give the illusion many folk will buy into, assuming the uptrend since 2009 shall provoke a bounce.
We've a collection of ample reasons to doubt this shall be so, due to 7,500 demanding we pay attention.
In summary, things look wintery. Making the scenario doubly scary were market moves on 27th and 31st August which saw the index gapped up, then gapped down.
This was to provide a textbook GaGa ruling, pointing pretty firmly down to 11,120 points. Beyond such a point will, we suspect, depend of what set of political incompetents are driving fear in the market place.
However, there's always a justified caveat.
Suspicious movements
The current month, September, has seen some very deliberate downward steps take place with this sort of thing tending to make us suspicious.
If our cynicism is to be justified, the index needs to experience a movement above 12,190 to reach 12,285 points.
While a simple 100 point move is fairly useless, it will prove important should the market better 12,285 as it ticks the first box to hint bottom may already be "in".
That being the case, it creates a scenario where above 12,285 allows recovery to 12,598 points, exceeding the immediate downtrend, entering an acceleration phase with 13,200 as viable.
Beyond such a level, we shall need to stir the tea leaves again. It's interesting to note there's even a visual glass ceiling awaiting at such a point.
For now though, we expect 11,120 points to be a guessed appearance.
Source: interactive investor Past performance is not a guide to future performance
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.
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