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The German DAX is starting to test back above the 15,400 level as indices across the globe start to bounce back after an initial sell-off, sparked by concerns over the derailing of the Build Back Better deal.
Additionally, the GER40 was able to post a bullish double-bottom on the chart, after selling failed to crack the December low. Double-bottom patterns often spark major price rebounds..
Stock markets across the globe are experiencing a pop again this morning following reports that Sen. Joe Manchin and President Joe Biden spoke Sunday night after a major blow up in negotiations around the president’s domestic agenda.
Apparently, the conversation ended with a sense that negotiations would, in fact, resume around the Build Back Better Act in some form in the new year. This is sparking some hope that the deal can be put back on track in the new year.
According to the GER40 lower time frame, bulls are likely to test towards the 15,500 area in the coming area. Typically, this key technical region has been a key swing area for the leading German Index.
Looking at sentiment towards the DAX, a slight bullish bias is in play with 62 percent of traders expecting more gains. This provides fertile conditions for a continuation of the rally, as traders are still bullish, but not overly, meaning the sentiment skew is not too one-sided.
Overall, if bulls are unable to get past the 15,500 area in the coming trading days it should be raising a red flag for perma GER30 bulls, that a further move lower could be coming. A break past this area, and the Ger40 could be testing back to 16,000 sooner rather than later.
GER40 Technical Analysis
The four-hour time frame shows that a bearish breakout has taken place from a large ascending wedge pattern. These patterns are typically bearish reversal patterns, and it appears by the size of the pattern that the downside is not fully done yet in the GER40 index.
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The daily time frame shows that the German DAX has formed a series of bearish lower highs, with triple-tops clearly seen on the higher time frames. This is typically bearish according to technical analysis.
I would also point your attention the key trendline on the daily chart. Bears are struggling to perform a daily close under the trendline, which is providing further fuel for more GER40 upside.
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