DAX30 Forecast And Technical Analysis: Is Cheap Money Always Good?
Published on September 16th.
ECB Monetary Policy announced. The deposit facility rates were lowered by 10 bp (-) to 0.50, lowering the historical low, and new monthly bond purchases of EUR 20 billion were perceived as DAX positive by the Market Players.
With the increasing liquidity, inflation and growth are targeted to increase. In times of abundance of liquidity, cheap money, which cannot find a place to go, can be expected to flow into the stock markets as in the 2008 crisis. Stan Druckenmiller, who is behind Soros’ defeat of the BOE, says, “Markets are raised by the liquidity, not by the company profits,” revealing the importance of abundant money for the indices.
Is the ECB’s new move really good news for European Banks?
The banking system of the European Region, whose balance sheets are in very poor condition, can be further challenged with the new implementation.
In addition, leaving the end of bond purchase programs open and the possibility of further interest rates cuts in the future may create a more downward expectation in credit costs. This situation may create a “stand by” climate for the investors.
With these developments, when we look at DAX Futures active futures contracts,
In the monthly charts, the loss of power at peaks is remarkable in DAX which maintain the upward trend. A clear RSI divergence shows the decreasing willingness of the buyers at the new peaks.
In the case of a new peak at 12490 – 12500 levels, a massive Head&Shoulder formation may occur.
On the daily chart, while support for the upward trend of 12330 is maintained, for the time being, the critical 12500 level can be a fake breakout.
Bearish White Swan On the Daily Chart, Bearish Bat Pattern on the H4 Chart and Bearish ABCD pattern on the smaller charts signal a bearish reversal soon. – Updated in the Live Charts –
With the break of 12330 support, the bullish trend in DAX Futures contracts could shift and the bearish move could be accelerated.
Unless the resistance of the 12500 is broken, the rise triggered by the ECB is likely to be the last peak of the DAX bullish movement.
With the break of 12330 support, respectively,
I would expect a drop to 11790 medium term.
Longer Term Forecast: After closing below 11800, I will be watching 10625.
Update: DAX has achieved the medium term target 10.700. Closing below 10500 will send the Index 9600.
Important Note: New patterns may appear and some emerging patterns may become invalidated. We publish our live charts D1 H4 H1 and M30 with updates and entry alerts. – Members Only –
Link to DAX30 Live Charts: DAX30 Live Charts
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