The DAX Index has been hit with a severe plunge downward again this morning. The German index is traversing values it last saw in mid-June. A short term technical chart is not enough to gain a perspective regarding the amount of damage the DAX Index has suffered since mid-October. If speculators have had the misfortune of being on the wrong side of the trade and have been pursuing short term reversals upwards they have likely suffered strong cash losses this week.
Clearly risk adverse trading has taken hold of the DAX Index and the reasons for this are complex. However the combination of coronavirus concerns hitting Germany and much of Europe, along with the unknowns lurking because of the upcoming US elections are certainly a partial cause for the nervous trading which has ensued since this week. US future markets are also indicating a potentially punishing negative start to the day for American indices when they open.
The DAX Index plunged to a low of nearly 11630.000 early today and has since seen a slight recovery. Speculators who have been paying attention may have used this morning’s lows to accumulate a short term position and cash out based on the notion some type of reversal would occur. However, standing in front of an oncoming freight train which has the ability to punish you is a terrifying prospect for many. Buying the German index under these present conditions will take plenty of fortitude and risk management ability.
Speculators brave enough to look for upside potential may target the 11775.000 juncture as a resistance mark. And the purely optimistic might even aim for additional momentum towards the 11860.000 level. Yes, these resistance levels are newly ‘minted’, meaning they technically exist because of the steep gap which was created when the DAX Index plunged this morning.
Traders who do not feel optimistic about the current state of the DAX Index and believe shadows will prevail over global indices may want to be sellers by using limit orders. If the German Index is able to muster a climb upwards in an attempt to retrace the early bedlam which was demonstrated earlier today, selling the DAX Index near the 11750.000 juncture may prove an opportunity to catch another leg downwards. Equity indices are suffering from anxiety and this is likely to continue near term.
DAX Index Short Term Outlook:
Current Resistance: 11775.000
Current Support: 11550.000
High Target: 11860.000
Low Target: 12250.000
