Market Overview: DAX 40 Futures
DAX futures moved sideways last week, low in a trading range at the prior swing low. The bears closed the last gaps and have struggled to get a break below this possible wedge bottom channel line. Bulls want to buy, but it is still a low-probability trade until a good reversal signal exists.
DAX 40 Futures
The Weekly DAX chart
- The DAX 40 futures last week was a small bull doji with a big tail above.
- It traded above the prior bar’s high, so it was a High 1, a reasonable sell signal after a bear breakout.
- The bulls see an attempt at a wedge bottom, a double bottom with the March swing low and the low of a trading range.
- It is also a swing target that bears took high in the expanding triangle that worked out. In 12 months, it is the first swing the bears have made successfully.
- The bears saw a breakout below a DB and expected a measured move down.
- Other bears saw the wedge top – a duelling lines pattern – a wedge top to a double top as a reasonable sell signal for 2 legs down. The move should be about half the pattern.
- But the bears are having trouble attracting sellers below the lows here. The stop is now far away, and so is the MA. Some will wait to sell a bit higher for a possible third leg.
- The bulls wanted a strong High 2 with the prior leg or a good reversal bar. If they can get a bull bar to close above a bull bar, that would be a sign of strength, and we should start to go sideways.
- The bulls know that broad bull channels tend to become trading ranges rather than reverse into bear trends. This is likely a leg in a TR.
- But 3 bear bars down, traders might expect one more leg. It could even be just one bar.
- The bears will probably get one more bar, and the bulls can take out their lower high.
The Daily DAX chart
- The DAX 40 futures on Friday was a big bear climax bar closing near its low.
- Bears were right to sell the first touch of the MA in 20 bars. But the bulls broke the swing high, putting it into a TR.
- A Big Up move following a Big Down move creates Big Confusion. When traders are confused, they are confident of only one thing. They doubt either side is strong enough to start a trend. Therefore, they expect every strong move up and down to reverse instead of leading to a trend.
- The bull bars were strong. It is more likely that it won’t be by much if we go below the lows.
- The bulls see a trendline break and now a test – they want a good reversal signal. There have been many legs down, so that’s a reasonable trade.
- But two big consecutive bear bars is a low-probability buy signal. The bears will likely get one more bar.
- Monday is important. If there are more sellers at the low of this bar, then a second leg is likely down.
- That is a reasonable swing if we trigger the sell and then form a good buy signal.
- It is nested wedges here low in a trading range. We might go sideways or set up a sell signal that fails.
- Can the bears get a breakout and MM down? The channel is tight. But bulls are buying above other bull bars and making money.
- More likely bulls will buy and buy lower.
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