DAX Xetra (cash index)
Having broken the resistance of the 8 month downtrend earlier this week, the DAX has been consolidating the move and used this as a springboard for the next move higher.
We mentioned yesterday that repeatedly during the recovery, the DAX has gone through periods of consolidation which are subsequently bought into.
Yesterday’s rebound from 11,416 and subsequent bullish gap higher today above resistance at 11,567 opens the upside once more.
A move to new 16 week highs means that the key long term pivot band 11,725/11,865 is now the next key test for the bulls.
Momentum indicators are confirming the breakout, with the RSI in the high 60s and at their strongest since May, whilst the MACD lines are also accelerating higher and Stochastics remain strongly bullish.
- The breakout this morning has left a gap open at 11,524 but there is a good near term buy zone between the gap 11,524 and old resistance turned support at 11,567.
The hourly chart shows continued strong configuration with the hourly MACD lines only just turning higher from neutral, giving upside potential.
- Expect pressure on the 11,725/11,865 overhead supply now which will give an indication of how serious this medium term bull recovery can sustainably change the long term outlook.
- The reaction low at 11,416 is now a key higher low above further support of the breakout at 11,371.