DAX
Following a week of volatile ranging, there is no current reason to suspect the behaviour will stop when looking at the setups of both directions. Summary (Please see Bull & Bear case below):
There is a good Bearish and Bullish case for the week. I expect breakouts to the bull side to fail and until we have seen a major bull setup, I suspect further trading range behaviour.
I will look for signs of a bearish continuation (Bear reversal setup in short term), above 12770.
I will look for signs of bullish reversal below 12510.
Bullish case:
Long term favours the bulls, but until we have seen a long term set up which confirms that view there is no reason for trading it. Nevertheless, in a heavy uptrend such as this, its always a healthy mindset to assume most attempts of resuming the trend will at least yield a good intraday swing.
Looking at a failed breakout to new high, this was expected due to the amount of bearstops which probably got hit, causing lots of volumes and a great zone for taking off some profits by bulls. Its also a decent short trade.
Bears managed to break the bullish trendline and back below the previous high, which caused a climatic bear trend day down to 12250, hit a stop loss level set too tight by trend followers. This is a breakout against the major trend, and got instantly paused the day after indicating no follow up. This latest move should have been enough to make traders doubt the trend, exit their longs and initiate shorts. Once a bullish set up presents itself, these are the traders which will help chase the market higher.
Friday made the first buy entry signal where I suspect traders will enter on the breakout above Fridays high. With such a strong bearish momentum in the short term, and the way this bullish entry was bought (same level tested 3 times), I suspect this move to fail and lead to a short.
I will look at buying these traders stop losses below 12505.
However, if we see a strong breakout above 12770 (red line), followed by bullish strenght and follow up, will have me reasses my short term view and consider looking for bullish trend setups from then onwards.
Bear case:
Short term the bearish trendline is stil intact, we saw a small overshoot and now a first attempt to break the bearish trend and resume the major trend.
The first breakout attempt rarely succeeds, especially since bears already showed resiliance around their stop-loss level 12770. The bullish setup is overbought and so far has no momentum.
However, I will be careful trading short in this market and will only trade small sizes when shorting.