DAX/CAC Technical Highlights:
- DAX sell-off brought into play support built over months
- CAC still maintaining an uptrend broadly speaking, but could change
DAX Technical Outlook Hinges on Big-picture Support, CAC Less So
During the recent swoon in risk the DAX fell, but somewhat reluctantly outside of Monday’s hammering. The decline brought into play numerous lows starting back in May. There are seven lows, including this week’s low, that make up a major support zone from 15060 down 14818.
These lows mark the bottom of a range that has taken on a loose form broadening top. These patterns are marked by repeated failures to maintain increasing higher highs. Each turn lower from highs end around the same level, until eventually the market’s inability to continue higher sours sentiment and selling becomes heavy enough to break substantial support.
Support is support until it isn’t, is a rule I live by – so for now it will be trusted until broken. That trust, however, is waning though as broadly speaking equity markets across the globe look vulnerable to a concerted sell-off in the months ahead.
The general trend is sideways, making it difficult to be bearish or bias with any real conviction. A daily close below 14818 should have the market on its heels in a meaningful manner and validate the malaise since May as a sign of a topping process.
DAX Daily Chart
The CAC is still maintaining an upward trajectory, even if its higher highs and higher lows since the summer have quite a bit of overlap. There is plenty of support below for the CAC to hang onto if the recent bout of equity market weakness is to be over.
There is support at 6747, the 200-day moving average just beneath there, a trend-line from July in confluence with the November low at 6655. As long as this narrow band of support holds then the outlook it neutral to bullish. A breakdown would likely occur if the DAX levels mentioned above fail.
CAC Daily Chart
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX