DAX PERFORMANCE-INDEX (.GDAXI) Rallies As Chinse Manufacturing PMI Overshadows German Issues
The Dax rebounded on Monday as traders focused on strong data from China which boosted risk sentiment and overshadowed data showing the German manufacturing sector remains deep in recession
The recovery in the Dax follows on from gains in Asia as investors cheered better than forecast Chinese manufacturing data. The Chinese Caixin / Markit manufacturing purchasing managers index rose to 51.8 in November up from 51.7, the fastest expansion since December 2016. The data eased fears surrounding the slowing of the world’s second largest economy amid the ongoing US – China trade dispute.
Regarding the ongoing trade talks, investors stuck with bets that the US and China would reach a trade deal sooner rather than later even after Beijing insisted that trade tariffs would need to be rolled back as party of the phase one trade deal.
German manufacturing pmi
German manufacturing pmi showed the sector remains stuck in recession. The pmi increased to 44.1 in November, up from 43.8 last month, where 50 separates expansion from contraction. It was the second lowest reading since June 2009. Delving deeper into the figures and some concerning trends remain. New orders fell for a 13th straight month and factories slashed jobs at the fastest pace in 10 years.
Data at the end of last month showed that the German economy avoided a recession in the third quarter and consumer confidence increased. However, inflation for Europe’s largest economy dropped and retail sales also declined. It feels premature to be calling the bottom of this slowdown. More data is needed to confirm whether that has been hit and the German economy is slowly turn a corner.
German politics surprise
Dax traders will be keeping a close eye on the political landscape in Germany after results of the SPD leadership contest surprised. The SPD voted in leaders from the left wing of the party, replacing more centrist candidates. The SPD are the junior coalition party. The change of leadership is now likely to result in a change of policy which Merkel’s CDU/CSU will struggle to accept. Traders will keep a close eye on developments.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 13,291.96.
The projected lower bound is: 12,657.26.
The projected closing price is: 12,974.61.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
A dark cloud occurred (which indicates that prices moved up strongly on the previous bar, opened higher, but then closed significantly lower). This implies weakness as the momentum appears to be shifting from the bulls to the bears. Note that the lower the close of the black candle (relative to the white candle), the more bearish the dark cloud pattern.
An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend. It then signifies that the momentum may be shifting from the bulls to the bears.
If the engulfing bearish pattern occurs during a downtrend (which appears to be the case with XETRA DAX PF), it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 28.3614. This is not an overbought or oversold reading. The last signal was a sell 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 43.67. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 13 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -177.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 12 period(s) ago.
Rex Takasugi – TD Profile
XETRA DAX PF closed down -271.700 at 12,964.680. Volume was 25% above average (neutral) and Bollinger Bands were 67% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 13,189.74 12,800.08 12,197.35
Volatility: 13 16 16
Volume: 71,265,304 79,369,856 87,321,336
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
XETRA DAX PF is currently 6.3% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .GDAXI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .GDAXI and have had this outlook for the last 0 periods.