DAX Xetra (cash index)
After such a strong intraday rebound yesterday for the DAX to close higher on the session, the reaction today could be telling as to the position of the bulls.
A renewed selling pressure and failure to build meaningful support will suggest that the recovery impetus will quickly dissipate.
Although the rebound formed a bull hammer candlestick one day reversal, perhaps it is still too early to think about a recovery, as the market has already dropped back this morning.
This comes as daily momentum remaining negatively set up, with the RSI is around 35 (still with downside potential to 30), the MACD lines having only just turned lower and Stochastics are negatively configured.
How the bulls respond to this early drop today is likely to determine whether this rebound is simply respite and another chance to sell, or part of a basing process.
The hourly chart shows the market is unwinding from oversold as the move higher from 11,803 has kicked in.
However, if another higher low can form above the old low at 11,865 can form, then the bulls will begin to grow in confidence.
- It was interesting to see 12,000 limit yesterday’s rebound, so this is a level the market will now be watching as initial resistance.
- For now the bulls need to build support above 11,865 and then look towards positive candles, whilst a close above 12,000 would begin to improve the outlook again.
- Initial support at 11,920 from today’s traded low.