DAX Xetra (cash index)
The selling pressure that has grown over recent sessions is now setting up for a test of the key June low at 12,104.
Yesterday’s huge bear candle may have only seen the market around 135 ticks lower into the close, but the psychological impact of the market having gapped over 40 ticks higher only to be sold sharply into could be significant.
The move certainly drives momentum indicators into sharper reverse, with the MACD lines crossing lower, RSI below 40 and Stochastics accelerating into negative configuration.
An early open lower again today just increases the pressure.
- Initially comes the August low at 12,120 but a close below 12,163 would be the lowest since early April and the intraday move to 12,104 would likely come under significant strain.
- A breach would then open the hugely important March 2018 low at 11,726 (which is a low dating back to February 2017).
It will be interesting to see how the momentum goes with this move now, with the three key lows of 2018 all coming at 32/33 on RSI, so whilst there is room for downside in this move (RSI currently 35), a decisive break in this bear leg may not be forth coming.
The reaction to a technical rebound will be the key move.
- There is initial resistance at 12,195 but the band around 12,300/12,350 is now key overhead supply.
A failure in a rally below here would be very bearish for continued downside pressure.