Travelling Technicals with Global Indices: DAX 30

The bastion of the European economy, Germany has averted many a crisis with its strong leadership skills, its commitment to finding a solution and its steadfast belief that the success on the Eurozone depends on the cooperation from all nations no matter the size. It has in the past encountered accusations that it uses its economical power to impose unreasonable austerity packages to those nations that find themselves in a fiscal dilemma in an attempt to save the economic trade zone from a frivolous fallout.

Guided by the principles of capitalism the country is one of the few that continues to outshine its peers and will continue to do so with its known ability to produce engineering marvels that leave many awe struck and brands that have been built over many years of reliability. Its economy is heavily industrial based with the perfect mixture of both labour and capital goods working in tandem to manufacture the end product.

If you hadn't guessed it by now, today's focus will be on the DAX index in Germany that tracks the performance 30 largest companies listed on the Frankfurt Stock Exchange. As you'll see upon closer examination that the main sector that holds the greatest weighting in the index isn't Financials but rather Chemicals and Automotive manufacturing especially the latter which forms the backbone of employment for the European state.

Some recognizable brands tracked in the DAX:

• BMW
• Adidas
• BASF
• Deutsche Bank 
• Bayer
• Deutsche Lufthansa 
• SAP
• Siemens
• Volkswagen 

Monthly

The chart we have above goes back as far as 1994 so we have a decent amount of price data to work with in this analysis. A difference I've noted from the previous charts I've charted before is there has been a break to the upside that has resulted in new highs being set. The year the upside break took place was 2013 and we've seen an unprecedented rally that show elements of momentum. 

Two common highs that often come into play in most charts are those made during both the IT bubble of the early 2000's and the Financial Crisis. These two have once again played a big role in deciding the direction of this chart as both highs bumped up at relatively the same levels. When 2013 arrived that level just above 8000 got taken out and we understand why we've seen the rally we have after nearly 13 years of no new highs. 

As stated previously there seems to been momentum in the rally higher but that subsequently feels shaky in the current market environment. We also see the the 50 SMA and 200 SMA lie below the price pushing the bias in favour of the bulls here however with the trend feeling flimsy we could see a retest of the long term support (past resistance) that could act as a springboard going forward. 

There has been a strong bounce off the 50 SMA but the candle produced following month end could've been more optimistic if we were to feel sentiment siding to the buyers. 

Weekly

Last week's analysis of the CAC 40 showed us the familiar topping pattern of the Cup and Handle Formation. The current chart exhibits the same pattern which gives us clues to what charts might be aligned to one another and how things could follow from each other. 

The 200 SMA cushioned the price from a steep fall and helped it bounce up strongly however we are sitting at a critical junction where the long term uptrend has been broken and the price lies below that. If this bearish formation were to be nullified we would need to see 11 500 taken out convincely which doesn't seem likely given the bleak economic outlook. 

Price is trapped between major moving averages, so at best I think we can expect the price to hobble along in a sideway range for a while before we see another significant move, probably to the downside.