I've been bullish
on European equities since the start of the year (my French readers on DailyFX.fr know this), but I'm starting to think that these markets might start to consolidate. I'm not sure if the timing is right (I'd prefer around the end of the month with the FOMC meeting on the 29th), but I've just noticed a potential negative divergence on the daily chart
of the DAX
. I'm quite keen on looking for divergences (standard and hidden) for trade setups, and I believe that a break of the RSI's trendline
support followed by a break below the DAX's 20-day moving average (support since mid-January) would confirm this divergence and open an initial target at around the 11,620 handle. The DAX
would have to fall back below 11,600 before we could really start talking about a deeper retracement of the past quarter's gains. This is all hypothetical of course, and perhaps we won't see any confirmation of this divergence. But if European equities take a hit following the ECB rate meeting Wednesday, then what I've stated above would be to take into consideration. The only real issue with this divergence is that I don't see anything similar on other indexes like the French CAC 40
and the Spanish IBEX 35.