dax daily outlook tues 08 sep pull back before potential push up towards range top 1237822015

(Click to enlarge charts)

Key elements

• As per mentioned in our latest weekly outlook (click here for more details), the Germany 30 Index (proxy for the DAX) has been “sandwiched” between the pull-back resistance of the former descending channel bearish breakout (in purple) and trendline support (in green) at 10320 and 10000 respectively (see 1^st chart).
• Since the horrendous decline of DAX from its April 2015 high of 12390, the price movement of DAX has a strong correlation with USDEUR (inverse of EURUSD for easier visualization). For example, EURUSD is on resistance which implies a potential downside movement is imminent and based on the intermarket correlation, it will be positive for the DAX as it is likely to see an upside movement (see 2^nd chart).
• Since the release of the latest U.S. Non-Farm payrolls data last Friday, 4 September 2015, the short-term (1 hour) price movement of the EURUSD has been capped by a “stubborn” resistance zone of  1.1170/1.1190 (see 3^rd chart).
• The short-term (1 hour) Stochastic oscillator of the Index has exited from the overbought region. This observation suggests a potential pull-back in price action before a potential push up occurs (see 4^th chart).

Key levels (1 to 3 days)

Intermediate support: 10065

Pivot (key support): 10000

Resistance: 10320

Next support: 9600 (long-term)

Conclusion

Based on the aforementioned technical elements, the Index is likely to shape a pull-back towards the intermediate support at 10065 with a maximum limit set at the 10000 daily pivotal support before a push up towards the range top at 10320.

However failure to hold above the 10000 pivotal support, the bullish expectation is likely to be invalidated to see a slide to retest the long-term support at 9600.

Source:  Charts are from eSignal & City Index Advantage Trader

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