German DAX Signals Risk For Further Losses

GER30 DAILY CHART

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Technical Outlook: The German DAX has been trading within the confines of this ascending slope line formation (red) extending off the 2016 lows with price reversing off parallel resistance back in November. A waning momentum profile and failure to hold above the 2017 high-close at 13480 suggests the index remains vulnerable for further losses in the days ahead.

Look for initial daily support targets at the 2017 high-week reversal close at 13127 backed by the 100-day moving average at ~13038- note that this threshold converges on the proposed median-line of a near-term downslope (blue) and a break below this level would be needed to suggest a more significant high is in place. Such a scenario would shift the medium-term focus lower towards key confluence support at 12734/39- a region defined by the 200-day moving average & the 50% retracement of the late-August advance and converges on a pair of slope lines (roughly second week of February).

GER30 240MIN CHART

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Notes: A closer look at price action further highlights this slope with a near-term pitchfork extending off the January highs deriving virtually the identical gradient of the broader structure. That said, we could see a bump off this confluence at 13169 but the focus remains lower for now while below 1341. A break lower targets 13127 and the 13038/67 support zone- look for a reaction there.

Bottom line: I’ll favor fading strength while within this formation with a daily close sub-13038 needed to suggest that a larger reversal is underway. Keep in mind we get the release of German Retail Sales and Unemployment Claims tomorrow morning.

GERMANY 30 IG CLIENT SENTIMENT

• A summary of IG Client Sentiment shows traders are net-long the GER30- the ratio stands at +1.3 (56.6% of traders are long) – weak bearishreading
• Long positions are 13.9% lower than yesterday and 11.9% higher from last week
• Short positions are 12.9% higher than yesterday and 30.9% lower from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Germany 30 prices may continue to fall. However, retail is less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed Germany 30 trading bias from a sentiment standpoint.

RELEVANT DATA RELEASES