DAX Index Lingers Above Important Support; May Bounce

At the time of writing, the DAX index was up by 0.18% on the day, and not far away from yesterday’s low of 11905. The overall trend remains firmly bearish and is, therefore, suggesting lower prices in the weeks ahead. However, in the short-term, the DAX index might see a bounce on profit-taking by bearish traders. The DAX 30 is oversold per the RSI-14 indicator being at 21.59 on the six-hour chart, and the risk-reward ratio for fresh positions is not good at the current level. Finally, the DAX index was also near the September 3 low of 11863, a level that blocked the DAX index to trade higher four times in August, and has probably now turned into support. The same level is also the 50% Fibonacci correction level of the rally from the August low to the October high. All these factors suggest to me that we might see some profit-taking at current levels. If the DAX index indeed drifts higher, the September 25 low at 12149 will probably be the level from where the DAX index might try to turn lower trying to reach today’s level.  The short-term trend will remain downwards as long as the index trades below the September 17 low of 12311.

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If the market does not bounce and instead establishes itself below the September 3 low, the price might decline to the August 29 low at 11636 before finding equilibrium. Around the 11636 levels, we also find an upward slopping trendline that goes via the 2019 low and the August low.  Around this trendline, I anticipate the DAX index to bounce unless the world economy experiences a hard landing.

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