Markets that switch from bullish to bearish on a weekly basis at the highs, often eventually correct to the downside and this has been the case for DAX, divergence on weekly momentum supporting this view.
However, last week’s analysis highlighted the potential for buyers to return to the market with futures trading close to 2 key downside targets – a weekly bull trend formed since this year’s low in March, as well as a 38% pullback to the entire 2014 gains.
This occurred, though an over 200 Pt rally from Monday’s 9595.0 base has attracted sellers at 9820.0, a 50% recovery to July’s losses, for sentiment to once again be testing the important support levels.
Further bounces from these can’t be ruled out, but in the immediate-term they should remain temporary. With this in mind the outlook for this week is to sell modestly on the open, but then at 9729.0, last week’s opening trade, with a stop loss at 9819.0, last week’s top.
Targets are to 9595.0, last week’s low, 9536.6, the 10 week base and 9479.0, a deeper 50% correction to this year’s rally.
