The German DAX had another bad week after the leading German index cracked its trend defining 200-day moving average and moved into a technical bear market, after moving below the 15,600 level.
Many other European indices are suffering, especially the ones linked with European growth and that are exposed to the conflict between Ukraine and Russia. Europe’s achilies heel is Russian energy.
Another reason why the GER40 has been tanking is the fallout from the FED. With US stocks sinking, it typically tends to spill over into EU equity markets, and especially the more liquid stocks in Germany.
Technical analysis paints a bearish picture right now. According to the GER40 lower time frames, bears are likely to pile in this week if the 15,000 to 14,800 area is broken.
Typically, the 14,800 to 15,000 technical regions have been a big swing area for rebounds leading German Index over recent months. If weakness persists under this area, we could be looking at a 14,000 or 13,000 DAX.
Looking at sentiment towards the DAX, a bullish bias is still in play with 64 percent of traders expecting more gains. This provides the conditions for a continuation of the downtrend, as retail traders are still bullish.
Overall, if bears are able to get past the 14,800-support zone in the coming trading days it should be raising a red flag for more losses GER40. Sentiment is pointing to more losses still.
GER40 Technical Analysis
The Bollinger Band indicator on the four-hour time frame shows that a big move is about to unfold as the bands narrow. This usually means a large directional move is pending or about to take place.
Should we see the lower Bollinger Band broken, then I think we could see the 14,800-support level broken, and a big downside move unfolding very fast.
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The daily time frame shows that the German DAX has formed a series of bearish lower highs, while the Ichimoku indicator on the daily time is now starting to issue a strong sell signal. This is not insignificant.
The Lagging Line of the Ichimoku indicator has also crossed under the Ichimoku cloud, and this is the final confirmation needed for a medium-term sell signal.
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