The DAX index added 45 points in the first five minutes following the release of the latest US Nonfarm Payrolls report, and twenty-five minutes after the report, the DAX index had kept its gains.
The move higher in the DAX 30 is well supported as the US labor market report was much better than projected by economists, and not reflecting the weakness that DAX investors have been expecting the last 12 months. It appears that trade wars are still to dent the strong US labor market.
US Labor Market Report
The US economy created 266,000 new jobs in November vs. the 180,000 projected by economists, an outcome that was much higher than the prior reading of 128K. The preceding reading was also revised to 156K from 128K. Overall, the US economy added more than 114,000 jobs over the last two months, showing that the US labor market is doing very well.
Another vital gauge, the US Average Hourly Earnings increased by 3.1% vs. the 3% anticipated, and 3% prior. Also, unemployment dropped to 3.5% from 3.6%.
While the DAX 30 index traded higher on the US Nonfarm Payrolls, the technical outlook remains downwards. However, this could likely change, so caution is warranted.
On November 20, the DAX index slid below the November 6 low of 13113 and effectively ended the short-term uptrend that had been in place since October 4. From its October low, the DAX index had risen by 13.27% without a healthy correction. Thus the end of the uptrend should have marked the start of a correction. Since November 20 my outlook has been neutral to bearish as long as the price traded below the January 28, 2018 high of 13390.
The DAX 30 did indeed turn lower sharply on December 2 as expected, and in the last few days, I said that traders would probably short-sell the DAX between 13113-13390, with their sights set on the 12680 level, which is a bit less than a 50% price correction of the rally from the October low.
This technical outlook remains in place, but the risk of this scenario to fail has increased following the latest US Nonfarm Payrolls report.
On the DAX 30 trading above the January 28, 2018, high at 13390, DAX traders will probably lift the index to the next resistance level, the all-time high at 13605. Beyond that level there is an inverse head and shoulders pattern target at 13776.7.More content