DAX30 can hold crucial support around 10,200 – at least for now…
Source: Economic Events May 18, 2020 - Admiral Markets' Forex Calendar
The DAX30 ended last week on a little roller coaster. After a sharp drop last Thursday, where the German index attacked the region around 10,200 points. It can hold that level, thanks to massive support and a sharp bounce in US Equities.
But when carefully looking at the short-term hourly picture, and assessing the sequence of falling highs and lows over the course of last week, the mode remains short-term bearish below 10,700 points.
While we have to wait to see whether there will be a volatile start to the week as there is a thin economic calendar, but we'd still be careful with long engagements. In fact, we'd consider Short engagements more attractive from a risk-reward perspective.
That is especially true after last Wednesday's comments from Fed chairman Powell, where he noted that the recovery of the US economy may take time to gather momentum.
He could have said that a V-shaped recovery in the US (but also globally) is off the table.
And with expected earnings for the S&P 500 being 28% down from their peak, and 13% below realized earnings (which is way less than during previous recessions and can only be justified by a massive V-shaped recovery in earnings in 2021), US Equities, but also Equities in general including the German DAX, seem to be overvalued, and a next sharper leg lower stays a serious option.
Technically, the DAX30 CFD stays at least neutral as long as we can hold above 10,200 points, but a break lower activates 9,600 points as target on the downside in the days to come:
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between January 30, 2019, to May 15, 2020). Accessed: May 15, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of the DAX30 CFD increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, in 2019, it increased by 26.44% meaning that after five years, it was up by 34.2%.
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