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The German DAX is starting to test back towards the technically important 15,000 level as European indices suffered another bloody sell-off amidst weak PMI data and escalating tensions between Russia and Ukraine.
News report suggest that Russia-US talks over the weekend failed, prompting the US to order diplomatic families out of Ukraine. The UK also did the same. Expectations are rising that Russia could send troops into Ukraine any time now.
It should be noted that Russia is the European Union’s 5th largest trading partner and top energy supplier, complicating the situation for the EU should sanctions need to be applied to Russia.
Separately, yesterday’s data showed that the German manufacturing sector contracted further in January to 48, from 48.7 in December. Omicron restrictions, supply chain disruptions and rising prices have played a part in dampening activity.
According to the GER40 lower time frame, bears are likely to test towards the 15,000 to 14,900 area in the coming days. Typically, this key technical region has been a key swing area for the leading German Index over recent months.
Looking at sentiment towards the DAX, a big bullish bias is in play with 68 percent of traders expecting more gains. This provides the conditions for a continuation of the drop, as traders are still bullish, meaning that the sentiment skew is now getting to one-sided.
Overall, if bears are unable to get past the 14,900 area in the coming trading days it should be raising a red flag for more losses GER40. A break past this area, and the Ger40 could be testing back to 14,000 sooner rather than later.
GER40 Technical Analysis
The four-hour time frame shows that a bearish double pattern is looming over the Ger40, providing a worrying sign that the index could be preparing to drop under the recent most bearish low, which was set just under the 14,850 region during October of last year.
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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 is now starting to issue a strong sell signal. This is not insignificant.
I would also point your attention to the Lagging Lien of the Ichimoku indicator, this has now crossed under the Ichimoku cloud, and is known as the final confirmation needed for a sell signal.
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