dax daily outlook thurs 31 mar 2016 potential push up to test medium term resistance at 10130 with e

(Click to enlarge charts)

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has broken above the 9970/10060 short-term pivotal resistance and invalidated our direct drop bearish scenario. The market is still in an “intoxication state” after Yellen’s dovish speech on 29 March 2016 to go slow on future policy benchmark interest rate hikes due to a weak global growth situation. The key emphasis is that we are now in a situation where demand for goods and services will be lacklustre on a global scale which translates into weaker net earnings growth.  

However, short-term momentum remains positive plus “traditional” window-dressing for end Q1 2016 where the fund managers’ books of equities holdings is likely to be “beautified” to show a positive quarterly return. Therefore, it will be prudent not to fight such “animal spirits” for now.

Please click on this link for a recap on our previous short-term daily outlook/strategy.

Today key economic data release for Germany and Euro zone as follow:

1)      Retail Sales for Feb @ 0600 GMT

2)      Unemployment change for Mar @0755 GMT

3)      ECB Monetary Policy Meeting Accounts @1130 GMT

Key elements

• The Index continues to trade above the lower limit of the bearish “Ascending Wedge” now at 9850 which is slightly above the swing low areas of 17/22 March 2016 at 9750.
• The hourly (short-term) Stochastic oscillator has just exited from its oversold level which indicates a revival in short-term upside momentum in price action of the Index.
• Based on the Elliot Wave Principal, the Index is appearing to be evolving in a short-term bullish wave structure (a minimum of 5 waves) from the low of 9806 printed on 29 March 2016 @6pm. Current price action is appearing to be shaping a potential final 5^th wave of this impulsive structure with a possible end target (the standard 0.618 Fibonacci protection) at 10195 which also confluences with a 1.00 Fibonacci projection from the 24 February 2016 swing low of 9123. Interestingly, this potential 5^th wave end target of 10195 is just slightly above the 10130 weekly/medium-term pivotal resistance and now the upper limit of the “Ascending Wedge”.

Key levels (1 to 3 days)

Pivot (key resistance): 10130/195 (weekly/medium-term)

Supports: 9955 & 9850/750

Next resistance: 10390

Conclusion

The Index is likely to shape a potential push up to test the 10130/195 weekly/medium-term pivotal resistance. Thereafter, it may shape a pull-back towards the first short-term support of 9955. Only a break below 9955 is likely to trigger a further decline to target the lower limit of the “Ascending Wedge” at 9850/750.

On the other hand, a daily close above 10130/10195 is likely to have invalidated our medium-term bearish scenario to see an extension of the countertrend rally towards the next resistance at 10390 in the first step.

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