DAX 30/CAC 40 Technical Highlights
- DAX edging lower from neckline resistance, t-line support nearing
- Bottom-side of steep channel in the CAC in play to start the week
DAX edging lower from neckline resistance, t-line support nearing
Recently, the DAX traded up to the neckline of the long-term head-and-shoulders pattern dating back to last year. The smallish turn down last week wasn’t a powerful rejection but could nevertheless turn out to be an important high.
To confirm a larger turn lower we can use the channel rising off the December low as a guide. The underside parallel and previously broken June 2018 trend-line intersect right around the same area. A hold will keep a bullish tilt intact, but still have big resistance ahead in focus.
A break of the trend-line, however, will be reason to look for weakness to set in and possibly confirm the neckline retest. For the DAX to roll over materially it will likely be required that the U.S. weaken in a meaningful way, or at the very least slow its roll towards higher prices while German stocks go back to exhibiting strong relative weakness to their U.S. counterparts much in the manner they did last year.
DAX Daily Chart (Lower from neckline, trend support up next)
Bottom-side of steep channel in the CAC in play to start the week
The CAC has been trading in a very tight upward channel since bottoming in December, and on Friday it closed at the bottom-side parallel. This will make early-week trade important. A break outside of the channel won’t necessarily be a major negative but will undermine the clean trending pattern. No major support to speak of at the moment (200-day is at 5185, may not be significant, though), while resistance comes in at last week’s high at 5315 and then the trend-line off the May high.
Continue to watch the relative performance between the DAX and CAC, as the latter continues to be the bright spot. For those trading these two major European indices, looking to the stronger index for longs and weaker for shorts when set-ups present themselves can help in staying on the right side of the path of least resistance.
CAC Daily Chart (Channel support getting tested)
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—Written by Paul Robinson, Market Analyst
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