GER30 Technical Analysis – DAX could turn bearish

The German DAX is starting to test its trend defining 200-day moving average once again, as the recent parabolic recovery towards the 15,800 area fizzles out of new COVID-19 lockdown fears.

Stock markets across the globe are experiencing turbulence, so the DAX is a natural candidate for downside volatility as the German economy is led by its productive manufacturing sector.

Should see weakness below the 200-day moving average, and further stocks weakness the would be if either omicron variant fears result in strong risk-off trading or if the Fed signalled a fast pace of coming rate hikes for next year.

Both of these situations could weaken stocks heading into year-end. And let’s not forget that German equity traders also the ECB meeting to contend with this week, which is likely to be on the dovish side.

Overall, traders should expect more losses if we see the 200-day MA, at the 15,470-level broken, with the 15,300 and 15,000 levels the major downside targets. Failure to move past 15,600 this week should be considered a further warning sign.

Looking at sentiment towards the DAX, a slight bullish bias is in play with 58 percent of traders expecting more gains. This is the not ideal conditions for a major market rally, as traders are still bullish, despite the pullback from the weekly high.

Overall, with COVID-19 and tapering fears rising, the slight bullish sentiment and weakening technical around the 200-day MA should be raising a red flag for perma GER30 bulls.