Market Overview: DAX 40 Futures
DAX futures moved lower last week with a DAX 40 bear channel near the February close and near the 200-week moving average (MA). The bears want a breakout below the February low down to a measured move target near October 2020. The bulls want a higher low major trend reversal, possible double bottom buy, to keep the long-term bull channel up to March’s highs. With tails on the bars expect some sideways to down trading next week.
DAX 40 Futures
The Weekly DAX chart
- The DAX 40 futures weekly had 5 consecutive bear bars testing the 200-week moving average (MA). After a 2-year bull trend traders expected 2 legs sideways to down and are deciding whether this is nearing the end of the second leg.
- We are always in short in a bear channel, so we will likely trade lower next week. But the last time there were 5 consecutive bear bars was the COVID crash. I could not find a consecutive set of 6 bear bars before.
- So it is climactic and therefore a reasonable place for profit-taking.
- But with 5 bear bars, traders expect the first reversal to be minor so we might get to either the February close or low. Maybe both.
- The bulls see we are pausing at the 200-week MA which is the pre-COVID support area. They see a sell climax and a possible higher low major trend reversal.
- But they need bull bars. An outside up or a good close to convince traders to swing long. They want a double-bottom trend resumption but the math isn’t that good for a swing yet.
- The bulls see last week was a possible micro DB with an equal low to last week. But neither bar closed on their lows, so it’s not as bearish as it could be.
- The bears see a bear trend from January, with the most recent 5-week consecutive bear bars as the second leg. They want the leg to continue down to the February lows and a breakout with a possible measured move.
- Al recommends using the lower high as the first measured move target distance.
- So from the March 28th high to the February low, the target would be around 11600, the October 26th 2020 low. That is also a harmonic with the distance from January’s first bear leg.
- Bears are unwilling to hold short into the weekend so they are scalping. That means bulls will start to swing, buying here and lower, betting on a wedge bottom reversal or a double bottom with February.
- We have been going sideways in a narrowing trading range since February. Why? 14000 is a big round number and that could become the middle of a trading range that might last for the remainder of the year.
The Daily DAX chart
- The DAX 40 futures moved lower last week ending Friday with a pair of consecutive bear bars closing near their lows. It is reasonable to expect that we move lower next week.
- We reversed down from both the 50-day MA and the 20-day MA, back to the April 27th low but not lower. Even though is it a bear channel, the tails on the bar suggest that even though we might be always in short, it is not as bearish as it could be.
- The bulls are looking for a higher low major trend reversal. They see a wedge bottom with March 11th and April 27th. They see we are at the bottom of a tight trading range and a reasonable place to start swings.
- But where is a good buy signal? The previous 4 bull bars which closed on their highs all sold off, so it is likely next week with any strong reversal the bulls will continue to scalp.
- The bears see a broad bear channel and continual resistance along the bear trend lines. They see we are rejecting the 20-day and 50-day moving averages so it reasonable to keep swinging until a reasonable buy signal appears.
- The bears want a close below 13600 for a measured move down to near the February low.
- But why are we pausing here? We are in the middle of a trading range with February’s low and the March 29th high. No one wants to buy high or sell low.
- When the probability is now 50% there are equal buys and sells, so we might continue to go sideways to down next week.
- If the bulls can get a reasonable reversal here they might get a double bottom reversal up with a measured move from the bottom of the wedge up to the March 29th high.
- If you’re buying, looking to trade small and scale in.
- If you’re short, get out above a bull bar closing above its mid-point or a High1 buy setup next week. Look to sell again at the trend line of the bear channel.
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