Friday, August 17, 2012

DAX Germany Weekly and Daily Charts Overbot Rising Wedge Negative Divergence


The weekly DAX chart is moving in lock-step with the U.S. NYA Index as well as the RUT small cap index.  The SPX, Dow Industrials (INDU) and Nasdaq (COMPQ) are near previous highs but the DAX, NYA and RUT are not. This relationship tells you to expect the same move in the NYA and RUT that you see in the DAX. And price sits at the upper trend line now for all three. Price will either jump above the trend line and signal that the market bulls plan on running lots higher, or, price will receive a spank down from the trend line and markets will begin moving lower, retracing the recent rally. Today is important since it will lock in the weekly print and candle for this week.

The red lines for the indicators for this year are all negatively sloped but are not negatively diverged since price did not make a higher high than the March high at 7200-ish. For the daily chart, negative divergence is firmly in place, along with a rising wedge and overbot conditions, all pointing to a spank down in the near term. The MACD line and ROC wanted to see another higher high in price as compared to the high a week ago, and these indicators received their wish.  Thus, the indicators are now all lined up to roll over. Note how price came up to fill the open gap from April which finishes this unfinished business.

The daily chart wants to smack price down due to the negative divergence. This would match up with price printing at the top trend line on the weekly chart; price would receive a spank down and not move up thru the trend line on the weekly chart, at least for now. Note how the moving averages are lining out sideways which hint that the price action may prefer to move sideways over the weeks and months ahead, say, thru the 6000-7000 range, using the 200-week MA as support. The rally move appears to be exhausted so the next few days and couple weeks are important. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Note Added 8/17/12 at 8:03 AM:  DAX is trading up a smidge this morning, now printing 7008.
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2 comments:

  1. MCAPAugust 17, 2012 at 7:25 AM

    I've been systematically short Germany via Oct 19 puts on EWG declines are sudden and quick so a 40 cent option can be attractive when it can slide into the money in a matter of days... I'll go fishing today for more around 35

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  2. Keystone SpeculatorAugust 17, 2012 at 7:59 AM

    Looking at EWG as a straight short trading play, using Keystone's 80/20 rule, price moved up thru 20.80 so 21.20 would be targeted. Also of interest is the break of 18 which should lead to 22. The daily chart is lined up with the same negative divergence so anywhere from this 21.03 to 22.30 is an attractive shorting area.

    In the direct near term, a short from 21.03-21.30 appears attactive, note the gap at 21.3 from May. Perhaps down from 21.3 to the 200-day at 20.33 then back up to 22-ish, then roll over. It will be interesting to see how Germany is perceived once they venture into the quagmire backing up the bailout of Spain, this action would permanently dirty their hands.

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