DAX Market Review, January 2019
DAX ended the year 2018 in -20% compared to the end of 2017.The index declined also during December and now the index has declined for 6 months in a row.
DAX ended the year 2018 in -20% compared to the end of 2017. The index declined also during December and now the index has declined for 6 months in a row. It is rare that DAX declines 7 months in a row that is although the trend is down, probability for a green month is getting high.
The trend is however down and the first major resistance is located at 11600/1800 area. First important support is at 10300, it is wise to be careful on long side if 10300 is taken out since the probability for the corrective cycle to continue is high.
On the monthly chart (below) RSI4 went below the 12 level, which is a few points lower than during the 2011 correction (2011 correction lasted 150 days). Current price action pattern is not bullish and the best estimate is, that volatility/rough swings to continue the upcoming 2-3 months.
On the weekly chart, the mid-term time frame (chart below), DAX continues in a declining trend. RSI has now made a series of higher lows, so called positive divergence, which makes it likely for a rebound in the near future (within 1-4 weeks). Based on the price action pattern, it is currently unlikely that 10300 is the bottom.
The current corrective cycle is now about -20% from all-time-highs and it has lasted for about 330 days. The last corrective cycle happened in 2015, which was also -20% and lasted about 330 days. Current correction is a bit different than the previous and the current correction does not yet remind of a new bear market cycle seen 2000 and 2008. The DAX level 10300 is a major level for the Q1 If this level breaks and gives in, probability for a deeper corrective cycle is getting bigger.