DAX Market Analysis, January 2021
December was another strong month for DAX, gain was +5.5% which is significantly more than historical monthly average of ca 3%. We commented in November that there are good reasons to expect a good December performance but this was even more than we expected.
December was another strong month for DAX, gain was +5.5% which is significantly more than historical monthly average of ca 3%. We commented in November that there are good reasons to expect a good December performance but this was even more than we expected. Also volatility was high - during first two weeks of December DAX tested 13500, which has been a significant resistance several times, and as the level held it also offered good shorting opportunities. On the low end, weekly EMA12 line provided support for the rebounds and then on third week DAX managed to break level 13500 up, testing ATH - and then again dropping down to nearly 13000 level. Overall, monthly candle ended as a bullish one but market was more nervous than we expected.
Long trend is clearly up, but also the level of positive delta to EMA6 and EMA12 averages starts to be significant and in the levels where DAX often as bounced back down to test the levels (EMA12 currently at 13090). January has been historically a neutral month for DAX so everything considered, we think one needs to be equally ready for DAX to move up and down from current level (when writing this on Jan 5, DAX is at 13710) - at least to test EMA12 level. It is not obvious that the month would be that bullish.
Long term support levels on monthly chart: 12000, 12700, 13090
Long term resistance levels on monthly chart: 13800, 14070, 14430
Below DAX weekly chart with month’s pivot points visible. We are currently above resistance level 13500 and next ones up are psychological 14000 and monthly pivot R1 at 14070. As mentioned, positive delta to averages as at a level from which DAX often has dropped to test at least EMA12. So trend is up but likelihood for a significant pullback is also high so also January can give us significant volatility.
Medium term levels of resistance: 13800, 14000
Medium term levels of support: 13520, 13200
We believe that market situation offers good possibilities for both long and short positions. For a long position we would wait for pullback to levels mentioned earlier, knock-out level should be at max 13000 or below.
For a short view, we think one should assume 13800 level to be tested and holding.
Above: Investors’ sentiment in US is increasingly bullish - to a point that likelihood for pullbacks is is quite high (contra-indication)
Above: Historically, January has been flat for DAX.
Above: McClellan oscillator peaked high and started dropping again - also this indicator is flagging increased likelihood for a pullback.
Above: Summary of technical indicators for DAX is mostly showing strong buy.
World’s main futures are also in strong buy.
Risker
This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.
The products are not capital protected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.