The DAX opened lower today due to overall weakness in the Asian markets and a string USD. Additionally the index was kept at bay because of comments from European Central Bank President Mario Draghi who stated that the ECB will not be introducing any form of Quantitative Easing at the current moment of time and would only reassess by first quarter next year. Additionally, recent reports have implied that the German Central Bank cut their growth forecast in half for the upcoming year. However, it is imperative to state that the DAX currently trades well above its important daily moving average.
Investors should closely monitor the upcoming economic reports scheduled throughout the week pertaining to China. Any weakness seen there can potentially have a negative impact on German equities, as China is Germany’s largest trading partner.
When looking at the hourly chart for the DAX, the index is showing its first sign of reversing, which clearly indicates that a build-up of heavy selling pressure is present. Additionally, its relative strength index is providing a sell signal, which is of course a bearish sign. Furthermore, its momentum indicators are showing first signs of a reversal which is a cause for concern for traders and investors. The next level of support for the DAX comes near the 10026 level and resistance continues to be near the 10100 level.
Short the DAX at current levels for a medium term target at 9950, with a strict stop-loss above 10103.